Retail growth positive
Firmer rand trajectory can see early interest rates cut depending on announcements from new administration
RETAIL sales rose by 5.3% y/y in December, beating market expectations of 4%, Statistics SA figures showed yesterday.
This unexpected rise came on top of a strong 7.9% in November.
Month-on-month, sales were down 2.6% but rose 5.6% in the three months to December compared with the same period last year, Statistics South Africa said.
The best growth was recorded for “all other” retailers, increasing by 14.7%. Retailers in household furniture, appliances and equipment increased sales by 10%.
Further, general dealers, retailers in textiles, clothing, footwear and leather goods also contributed positively in December.
Although retail trade sales decreased by 2.6% month-on-month, from 3.8% in November, the reality is that the growth will contribute significantly towards the first quarter GDP growth numbers of 2018.
Analysts said overall, retail sales recorded positive growth in the final quarter of 2017.
Some economists said more importantly is the fact that in the three months to December, retail sales rose significantly by 5.6%, heavily boosted by the November sales.
“The 12-month moving average rate of annual growth is clearly still trending weaker, despite the November boost in sales (helped by Black Friday) and is expected to slow further in 2018, unless the economy rebounds quickly and more jobs are created,” Judith Modise, a consumer consultant, said.
Modise said an improving political landscape including rising business confidence should help as more people will be employed and that will increase spending.
“South African consumers are still helped by relatively low inflation and if the Reserve Bank cuts rates this year, households will get more relief. The overall perspective on retail spending and the strength of the South African consumer is likely to change for the better in months ahead given the current business mood,” she said.
However, Modise said although one should expect sharp increases in tax during the Budget next week, but if the current environment which has lifted the rand since December last year continues, consumers are likely to be on the safe side.
Nedbank economist Johannes Khosa said although the December growth moderated, the reality is that the growth rate was stronger than the market’s forecast of 4%.
“The outlook for 2018 has also improved. The interest rate outlook looks more favourable following the recall of President Jacob Zuma while the firmer rand trajectory could lead to an early cut in interest rates depending on announcements coming out of the new administration, in particular, the make up of the new Cabinet,” he said.