Following the first expansion of the year in September, retail sales volumes fell back into contractionary territory in October, declining by 2.5% year on year (y/y).
Statistics South Africa said yesterday retail trade sales fell by 2.5% year-on-year in October 2023, with the largest negative contributors being general dealers, hardware retailers and all “other” retailers.
FNB senior economist Siphamandla Mkhwanazi said the lower sales was materially lower than the Reuters consensus expectation of a 0.9% increase.
He said the setback likely reflected consumers’ delayed shopping decisions, in anticipation of Black Friday deals in November.
Nevertheless, year-to-date volumes were 1.5% lower than the same period last year, underscoring the challenging consumer backdrop, with cost-of-living pressures weighing on consumers’ discretionary incomes, he said.
Statistics SA said seasonally adjusted retail trade sales decreased by 1.2% in October compared with September 2023. This followed month-on-month changes of -0.1% in September 2023 and 0.3% in August 2023.
Retail trade sales fell 0.6% in the three months ended October 2023, compared with the three months ended October 2022. The largest negative contributors to this decrease were general dealers and retailers in hardware, paint and glass.
Textiles, clothing, footwear and leather goods retailers were the largest positive contributors (10.4% and contributing 1.6 percentage points).
Seasonally adjusted retail trade sales increased 0.3% in the three months ended October compared with the previous three months. The largest positive contributor was retailers in textiles, clothing, footwear and leather goods (3.7% and contributing 0.7 of a percentage point).
Mkhwanazi said the decline in retail sales was broad-based, as only one out of seven categories recorded an expansion in annual volumes. And while the strong performance by clothing and footwear retailers persisted, the pace of growth had halved from last month’s print.
“In line with our expectations, sentiment indicators point to subdued consumer demand in the fourth quarter of 2023,” he said.
The FNB/BER Consumer Confidence Index edged slightly lower to -17 index points in the fourth quarter, from -16 in the third quarter, the lowest festive season reading in more than 20 years.
“In the same breath, sentiment among retailers, although improved from 32 to 47 in the fourth quarter, shows the uptick to be driven by improvements in profitability and general business conditions (on the back of less intense levels of load shedding at the time of the survey), rather than improved sales growth.
In fact, retailers of durable and non-durable goods reported lower sales volumes compared to the same period last year, while semi-durable goods retailers continued to see higher demand.
“These suggest that consumers, particularly in high- and mid-income segments, will be cautious during this holiday shopping season, which should worry retailers of non-essential goods,” said Mkhwanazi.
The relative strength in clothing was reflected also in yesterday’s release by TransUnion of a survey of the credit landscape in the third quarter, which showed that consumers generally remained resilient with new personal loans up 7.5% and clothing up 11.2%, compared with the same quarter a year before.
However, new credit card originations fell 6.3%, retail revolving credit originations were down 10.3% while vehicle loans fell by 7.5%.