Business morale on the rise, but retail sales lag
RETAIL sales disappointed in January by contracting, while business confidence increased marginally in the first quarter, data released yesterday showed.
The main drag from the consumer data in retail came from general dealers and textiles, clothing, footwear and leather goods’ categories, where annual sales contracted sharply.
Retail sales disappointed by contracting 2.3 percent year on year, against the market’s forecast of a 1.2 percent growth, following a 1 percent decline in December.
Mamello Matikinca, an economist at First National Bank, said while the contraction was partly due to base effects, high inflation, weak household credit extension and the lag effect from the interest rate hike last year could also explain the weakening trend in retail sales.
Slowdown
She said there was a broadbased slowdown – with the exception of pharmaceuticals and medical goods, cosmetics and toiletries, which rose 3.6 percent year on year from 2 percent in December, in retail sales.
“While we expect growth in consumer spending to improve in the year ahead, supported by falling inflation, tax increases will definitely limit the rate of the increase. Furthermore, weak consumer confidence, household credit demand and high unemployment will contain household expenditure.”
Rand Merchant Bank said that the RMB/BER Business Confidence Index (BCI) increased by a minuscule two points to 40 points in the first quarter. This meant only four out of every 10 respondents were satisfied with business conditions. Since 2008, the BCI has only been above the neutral 50 point mark on four occasions – a pattern consistent with an economy continuously treading water.
The survey found business confidence edged higher in three sectors, while it eased in the remaining two.
“Confidence also crept higher in the wholesale and motor trade sectors, but declined in building and manufacturing. Worrying is the reality that since 2015, the RMB/ BER BCI has remained almost entirely in net negative terrain in all but one sector, ie the wholesale trade (where sentiment has held above 50 points for 80 percent of the time). Pessimism seems to be widely spread indeed.”
RMB said from an overly low level in the fourth quarter, confidence among retailers increased to 45 points in the first quarter.
It said despite the index jumping by 11 points, a majority of respondents still remained unsatisfied with business conditions.
“Growth in total retail sales volumes is showing few signs of life, and in some cases it’s even contracting, with the rate of increases in selling prices slowing quickly on a broad basis. After a brief period of some relief, pressures on margins has quickly returned. Retailers of discretionary products continue to bear the brunt of consumers’ strained finances.”
RMB said business confidence had failed to inspire for some time and the first quarter of 2017 was no exception; a twopoint increase in the survey to a still-low 40 points was hardly reason to cheer.
It said with the exception of few industries, which were benefiting to some extent from the revival in agriculture, mining and manufacturing exports, the overriding message from the first quarter survey results would seem to be one of continuously weak underlying activity with most sectors still in a holding pattern.