CONSUMERS held back on purchases to save for Black Friday, says FNB’s senior economist.     African News Agency (ANA)
CONSUMERS held back on purchases to save for Black Friday, says FNB’s senior economist. African News Agency (ANA)

Sales rise 0.3% year-on-year in October, but below forecast

By Dineo Faku Time of article published Dec 12, 2019

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JOHANNESBURG - Retail sales increased 0.3percent year-on-year in October from 0.4percent in September but fell below the market forecast of 0.6percent.

Statistics South Africa (StatsSA) said yesterday that retailers in food, beverages and tobacco grew 4.5percent during the month. StatsSA said household furniture, appliances and equipment retailers jumped 3.2percent, but hardware, paint and glass retailers declined 2.5percent.

Economists believe that October’s marginal year-on-year growth was the latest indication that retailers and consumers were battling South Africa’s constrained economic environment.

Investec’s Lara Hodes said October’s reading continued to indicate the constrained domestic demand environment, weakened by muted economic growth. Hodes said the subdued retail inflation reading, which was hovering below the Consumer Price Index, further evidenced the plight of retailers, whose margins continue to remain suppressed in a highly competitive environment. She said the situation was also dire for consumers.

“Consumers continue to face a myriad of challenges, including structurally high unemployment rates,amid a sluggish labour market, slowing wage growth and markedly higher administered prices,” Hodes said.

StatsSA said seasonally adjusted retail trade sales decreased 0.2percent compared with a 0.6percentincrease in September and a 0.5percent decline the prior month.

Siphamandla Mkhwanazi, a senior economist at FNB, said consumers held back on purchases to save for Black Friday.

“Consumers may have delayed their purchases in anticipation of big discounts on Black Friday, consistent with our view that households have become more price-sensitive and are more inclined to buy goods on special,” said Mkhwanazi.

He said a slowing trend in retail sales was consistent with the souring of consumer sentiment, as shown by the capitulation of the FNB/BER Consumer Confidence Index from +5 in the second quarter of 2019 to -7 in the third quarter of 2019.

Mkhwanazi said, while households’ appetite for credit remained reasonably strong, the persistent pressures on disposable income and rapidly weakening credit scores meant consumers were less likely to take up more debt.

“This, combined with the deterioration in consumer sentiment, suggests a relatively tepid medium to longer-term household consumption prognosis. More immediately, however, we expect a transitory uptick in retail sales heading into the festive season,” Mkhwanazi said.

The Nedbank Group Economic Unit said that the figures, together with the inflation data released earlier in the day, were further evidence that the weak domestic demand conditions had limited exchange rate pass-through effects and other cost-push factors and kept the inflation outlook benign.


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