December retail sales make 2019 the worst in a decade
Retail sales contracted in December, coming in sharply below expectations and delivering their worst annual performance since 2009, Statistics SA data showed on Wednesday.
For the full 2019 year, retail sales growth averaged 1.2%, the weakest rate since 2009, underscoring the difficult trading conditions shop owners have faced amid poor consumer confidence and constrained household spending.
The start of intense loadshedding, which began with an unprecedented stage 6 on December 9, likely also hit the sector, said economists.
The figures follow disappointing unemployment and manufacturing numbers on Tuesday, painting an even bleaker picture for the last quarter of 2019.
Retail sales contracted 0.4% year on year, coming down sharply from November’s 2.6% growth, which received a bump from Black Friday sales.
On a seasonally adjusted, month-on-month basis, retail sales shrank 3.1%, down from a revised print of 2%.
The growing participation in Black Friday deals complicated the interpretation of retail trends, said Standard Bank economist Elna Moolman, as Stats SA’s models did not yet fully capture the impact of the discount day, which is a fairly new feature on SA’s retail landscape.
Nevertheless, the 3.1% seasonally adjusted contraction in December “more than reversed” the growth recorded in November, Moolman said. “This illustrates the big boost in November from Black Friday but also the general weakness in retail sales.
LOAD-SHEDDING
“The severe load-shedding in December likely aggravated this ... not only owing to the direct disruptions it caused but also the likely negative impact on confidence and income.”
December’s outcome undershot expectations in a Bloomberg survey, which forecast a 2% annual increase.
The retail sector was battered in 2019, with general retail stocks experiencing their toughest year since 1998, Business Day previously reported.
In January, Massmart, the owner of Game and Makro, announced it would be cutting 1,500 jobs from its underperforming DionWired and Masscash subsidiaries.
Jobs numbers released on Tuesday highlighted some of these difficulties. During the fourth quarter of 2019, the trade sector shed 159,000 jobs, according to Stats SA. As a result, the industry failed to contribute to a seasonal decline in the unemployment rate typically seen in the fourth quarter. This is associated with a pick-up in temporary jobs as businesses gear up for festive season trade.
Disappointingly, for the first time since 2008, the unemployment rate remained unchanged in the fourth quarter of 2019 at 29.1%.
Retail’s weak performance for 2019 overall was consistent with record high unemployment
and low consumer sentiment, said senior FNB economist Siphamandla Mkhwanazi.
“Under these conditions, households appear to have become highly price sensitive and are willing to delay purchasing decisions until goods are placed on special.
“Unfortunately, this exerts downward pressure on retailers’ margins, further compounding the unemployment conundrum, as evidenced by a decline in employment in the trade sector” in the fourth quarter of 2019, he said.
According to Stats SA, the largest drivers of the annual decrease were general dealers, which account for 40% of total sales in the industry, and includes supermarkets.
This sector shrank 0.8% and contributed 0.3 of a percentage point to the declines.
Moolman said the effect of ongoing load-shedding on the economy in 2020 remained a concern, with Standard Bank only expecting about 0.8% growth this year.
But amid benign inflation, which is only forecast to reach 4.2% on average in 2020, she said this meant the SA Reserve Bank could cut rates “in due course” and “provide more relief”.