Business Day

Slower re­tail sales growth in July may lead to Bank hold­ing rates

- Maswan­ Business · Finance · Retail · Consumer Goods · Industries · FirstRand · Old Mutual · Standard Bank Group

RE­TAIL sales in­creased at their slow­est pace in one-and-a-half years in July, with data show­ing that house­hold fur­ni­ture, ap­pli­ances and equip­ment re­tail­ers were tak­ing the most strain.

Re­tail in­dus­try play­ers and an­a­lysts at­trib­uted the sharp de­clines in house­hold fur­ni­ture, ap­pli­ances and equip­ment re­tail sales to stricter lend­ing cri­te­ria and a pref­er­ence by con­sumers to shun spend­ing on big-ticket items dur­ing tough eco­nomic times.

Re­tail sales grew 0.8% in July com­pared with the same month a year ago af­ter in­creas­ing 1.4% in June, Sta­tis­tics SA data showed on Wed­nes­day. While most of the re­tail­ers con­trib­uted pos­i­tively to re­tail sales, the house­hold fur­ni­ture, ap­pli­ances and equip­ment re­tail cat­e­gory fell 8% shav­ing off 0.4 of a per­cent­age point from head­line re­tail sales.

The sales of fur­ni­ture and those of elec­tri­cal goods tended to be the most af­fected, said Con­sumer Goods Coun­cil of SA CEO Gwarega Man­gozhe.

There was no doubt that, to man­age bad debts and pro­mote re­spon­si­ble credit pro­vi­sion, re­tail­ers were be­gin­ning to be more ju­di­cious in pro­vid­ing credit, he said.

First Na­tional Bank se­nior in­dus­try an­a­lyst Ja­son Mus­cat said: “It is re­ally a com­bi­na­tion of a con­sumer that is un­der pres­sure to fo­cus on ne­ces­si­ties rather than dis­cre­tionary goods, and a credit en­vi­ron­ment which con­tin­ues to slow. Credit-lend­ing cri­te­ria has tight­ened up since July, in line with reg­u­la­tion which is also putting pres­sure on durable goods sales.”

The lat­est re­tail sales data, which strongly sug­gest that con­sumer spend­ing is un­der pres­sure, sup­port views that the Re­serve Bank may leave in­ter­est rates un­changed on Septem­ber 22.

The Bank may leave rates un­changed mainly on ex­pec­ta­tions of a bet­ter in­fla­tion out­look in 2016, said se­nior economist at Old Mu­tual In­vest­ment Group Jo­hann Els.

Tighter fi­nan­cial con­di­tions, weaker lev­els of con­sumer con­fi­dence and un­favourable job mar­ket con­di­tions are among fac­tors that con­tinue to weigh heav­ily on the con­sumer, Stan­dard Bank economist Thanda Sit­hole said.

The slow­down in re­tail sales also pro­vides another strong con­fir­ma­tion that the high eco­nomic growth recorded in the sec­ond quar­ter will not be re­peated in the third quar­ter. Re­cently pub­lished min­ing and man­u­fac­tur­ing out­put data slowed sharply.

While con­sumer spend­ing was likely to re­main de­pressed in the months lead­ing up to the fes­tive shop­ping sea­son, “we are, how­ever, con­fi­dent that, not­with­stand­ing the eco­nomic cli­mate, there will be some pock­ets of fairly ro­bust sales al­beit off a base of sub­dued trad­ing”, Man­gozhe said.

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