Retail sales show end of recession
Stats SA figures reveal rise of 2.9% in June
STATISTICS released yesterday by Stats SA showed that retail sales rose by an unexpectedly-strong 2.9 percent year-on-year in June, its fastest rate since November 2016, indicating that South Africa might have gone out of recession in the quarter.
Sales rose by 2.1 percent in the second quarter. On a monthly basis, retail sales ticked up 0.2 percent in June compared to the previous month.
The highest annual growth rates were recorded for retailers in food, beverages and tobacco in specialised stores, which rose 12.4 percent, retailers in household furniture, appliances and equipment which surged 8.3 percent in the period and all “other” retailers which ticked up 5.8 percent.
Jason Muscat, a senior economic analyst at FNB, said the retail sales data indicated that consumers contributed positively to gross domestic product (GDP) in the second quarter.
The retail sales data indicated that consumers contributed positively to GDP in the second quarter.
“When viewed with the June mining and manufacturing, data suggests that GDP could rebound by as much at 2.5 percent quarter-on-quarter in the second quarter, but remain at a pedestrian 0.5 percent year-on-year.
“Overall, the outlook for household consumption remains muted, given just how weak consumer confidence is, although a shallow rate cutting cycle should provide modest relief until higher taxes are likely to take hold after the February budget,” Muscat said.
In June, Stats SA said that the country had slipped into its first recession in eight years after the economy shrank by 0.7 percent in the first quarter of 2017, which followed a 0.3 percent contraction in the final three months of 2016.
The downturn was caused by a sharp contraction in trade. Manufacturing output also shrank, while government and household spending both fell too.
The two industries that contributed positively to GDP growth in the first quarter were mining and quarrying industry and the agriculture, forestry and fishing industry, which rebounded in the first quarter on the back of eight consecutive quarters of contraction.
The recently released second quarter output data had also indicated a positive second quarter performance.
The growth of mining production slowed significantly last quarter.
But output in the manufacturing sector, which makes up a larger share of GDP, returned to growth after three consecutive quarters of contraction.
John Ashbourne, an Africa economist at Capital Economics, said that the retail sales figures supported his view that the country’s economy had returned to growth in the second quarter and that growth would surprise to the upside over 2017 as a whole.
“The economic contraction in quarter 1 was largely due to the very poor performance of the retail sector, where sales dropped by 0.9 percent quarter-on-quarter.
“We’ve long argued, however, that this was a temporary blip which was exacerbated by the increased prevalence of ‘Black Friday’ sales, which concentrated spending in the fourth quarter and then depressed it in the first,” Ashbourne said.
Stats SA is expected to release the second quarter GDP figures early next month.
South Africa’s retail industry has been battered in recent quarters due to a suppressed consumer confidence, sluggish business confidence and employment being at a 14-year high.