Weaker economic footing in third quarter

ACTIVITY data released yesterday by Statistics South Africa (StatsSA) showed that the economy began the third quarter on a weaker footing after retail sales growth slowed from an upwardly revised 3.2 percent year-on-year in June to 1.8 percent year-onyear in July.

This followed data last week that showed that the mining sector also weakened in July, with output growth slowing from 1.3 percent in June to 0.9 percent year-on-year in July.

The manufacturing sector, however, when measured in quarter-to-quarter terms, saw output in the sector rose faster in July than it had in June.

StatsSA yesterday said that the highest annual sales growth rates were recorded in all “other” retailers, which surged 12.4 percent. Retailers in food, beverages and tobacco in specialised stores went up 7.1 percent, while retailers in household furniture, appliances and equipment ticked up 6.8 percent. On a month-tomonth basis, retail sales shrank 0.6 percent in July compared with the previous month.

John Ashbourne, an Africa economist at Capital Economics, said yesterday, that taken together, South Africa’s economy probably slowed a bit at the start of the third quarter.

“Sales continued to grow in most sub-sectors. The decline in sales by general dealers, however, may suggest that the spending power of low-income South Africans is struggling. Sales of durable goods, which tend to be a measure of economic sentiment for upper-income groups, continued to rise,” Ashbourne said.

Retail sales form part of the trade sector of gross domestic product (GDP), which was the worst-performing sector in the first quarter, contributing to a 0.7 percent contraction in GDP and placed the country in technical recession.

However, last week’s data from StatsSA showed the economy had moved out of recession in the second quarter of the year, led by agriculture, which surged 33.6 percent, and mining, which grew 3.9 percent in the quarter, while trade was up 0.6 percent.

Jason Muscat, a senior economic analyst at First National Bank, said yesterday that the retail sales data showed a glimpse of consumer relief on the horizon.

“With the recent interest rate cut and the potential for another one this year, as well as a relatively benign inflation backdrop, there does appear to be some consumer relief on the horizon. We maintain, however, that this relief will likely be short-lived, as tax revenue shortfalls will have to be bolstered by further tax hikes in the new year,” Muscat said.