Retail sales may be enough to end slump

A meagre boost in the retail sector will likely cause SA to steer out of the recession. Despite headwinds to the consumer, relatively benign inflation and interest rates helped growth in the sector, analysts say.

A meagre boost in the retail sector will likely cause SA to steer out of the recession.

Despite headwinds to the consumer including a VAT increase, weak household credit extension, depressed sentiment, and a mounting fuel price relatively benign inflation and interest rates helped growth in the sector, analysts say.

September’s retail sales increased a meagre 0.7% from the same month in 2017, less than half the economists’ consensus of 1.9%, according to a Bloomberg poll.

While the retail sales figures compared with a year ago are disappointing, the rise over the quarter indicates that the economy has grown off a very low base in the third quarter.

The three-month seasonally adjusted figure, used to calculate GDP, came to 1.5% for September, compared with the previous quarter. Following manufacturing and mining figures released last week, the uptick in retail sales may boost growth slightly when Statistics SA publishes its GDP report for the third quarter in December.

Spending by consumers accounts for 60% of GDP and is seen as a catalyst for economic recovery. GDP contracted in the first and second quarters, placing the economy in recession for the first time in almost a decade.

Economists define a recession as two consecutive quarters of GDP decline.

“September activity data released over the past week has been pretty downbeat. But conditions still seem to have improved in recent months, supporting our view that the economy returned to growth in the third quarter,” Capital Economics economist John Ashbourne said.

However, growth will likely remain low.

“The rate of improvement in the SA economy remains very unconvincing,” Stanlib chief economist Kevin Lings said.

A fuel price cut in December should give consumers relief.