Retail trade sales may reflect positive story

Seasonal hiring ahead of the festive period in 2017 may have boosted employment during the first quarter of 2018, data due this week is expected to show. However, uncertainty over future job creation remains.

The quarterly labour force survey revealing employment trends during the first quarter will be the main economic data this week alongside retail trade sales that are expected to reflect a positive outcome.

Second-tier data for March include civil cases for debt, wholesale and motor trade sales and building statistics scheduled for release on Thursday.

The South African Chamber of Commerce trade conditions survey for April will be published on Wednesday.

Employment data will be published on Tuesday.

The unemployment rate dipped to 26.7% in the fourth quarter of 2017 – from 27.7% in the previous quarter — and economists do not expect much improvement, especially since the spike in seasonal hiring over the festive period is typically reversed in the following quarter.

Lara Hodes, an economist at Investec, said: “We therefore expect unemployment to rise slightly to 26.9% (for the first quarter of 2018).”

Jeffrey Schultz, an economist at BNP Paribas, said new labour market participants entered the market in the first quarter. The unemployment rate might deteriorate slightly as “the economy is not yet in a position to all of a sudden become massively labour absorbing”.

FNB chief economist Mamello Matikinca said: “We do, however, anticipate some support from a faster expansion in the tertiary sector in the first quarter.”

Retail sales, which contribute to the tertiary sector, had been robust since the Reserve Bank cut interest rates by 25 basis points in July 2017 – the first rate cut in five years — and have averaged 5.5% every month since August.

The momentum is expected to have continued in March, buoyed by pre-Easter buying and consumers front-loading purchases ahead of the VAT hike in April.

“March retail trade sales are the last piece of the GDP puzzle and, despite a strong showing in the first two months of the year, the sector may well contract on a quarterly basis,” Matikinca said. This was due to the high base caused by Black Friday and festive season shopping in the fourth quarter, she said. As a result, FNB expected GDP for the first quarter to contract by about 1% compared to the previous quarter.

Miyelani Maluleke, an economist at Absa, said the house view was for 5% yearon-year growth in retail trade sales for March, rising from 4.9% in February. “The strong increase in consumer confidence recorded in the first quarter bodes well for spending momentum in the quarters to come, if sustained.”

However, Schultz said BNP Paribas expected retail sales to moderate to 4.4% and for a slowdown in quarterly figures. But low inflation was likely to continue to boost real disposable income.