Rise in costs arrests retail sales growth
THE SHARP rise in costs amid slowing real income growth in many South African households has put a brake on retail sales, which decelerated to 1.9 percent year-on-year growth in June from an upbeat 6.2 percent initially reported for May.
The June figures released by Statistics SA yesterday surprised on the downside, analysts said, as they were lower than market consensus of 3 percent.
Vunani Securities economist Ilke van Zyl said weaker retail sales data spoke to a continued slowdown in household consumption. While base and seasonal effects distorted the year-on-year figures in April and May, the 12-month rolling average clearly reflected the deteriorating trend. The latter slowed in June to its lowest rate (3.4 percent year on year) since October 2010, and down from a recent peak of 6.4 percent year on year in August 2012.
The May sales figures had surprised the market, with analysts arguing they were not an accurate representation due to technical data distortions. The May figure was revised down to 6 percent yesterday.
Stanlib chief economist Kevin Lings said it was more useful to look at the sales figures on a trend basis rather than month by month. Yesterday’s figures showed that retail trade sales for the three months to June increased by 3.3 percent from the second quarter of last year.
“Consumer income growth is slowing, reflecting the lack of job growth as well as some moderation in salary adjustments,” Lings said in a note. He said consumers had to cope with unavoidable increases in costs such as energy, transport and water, which had eroded their retail spending power.
Food prices have increased 6.8 percent year on year, R2.19 has been added to a litre of petrol since June last year and electricity prices are up 10 percent over the same period.
Even though the monetary policy committee decided to keep the repo rate unchanged at 5 percent last month, yesterday’s figures showed that consumers were still hesitant about making big financial commitments such as buying household furniture, appliances and equipment. These goods contributed minus 0.1 percentage points in real terms to the growth in June and were the only category with a negative contribution.
The highest annual growth was recorded for retailers in hardware, paint and glass, who saw 5.3 percent growth; other retailers, who recorded 4.9 percent; and retailers in textiles, clothing, footwear and leather goods at 4 percent growth.
The July BankservAfrica economic transaction index (Beti) showed that South African consumers were back in a spending mode, and were handing out more than what seemed possible a year ago.
The Beti, which tracks electronic and cheque transactions below R5 million within different banks tracked 84.2 million transactions in July, the highest number since the index started in January last year. The July Beti also represented the highest ever monthly turnover that BankservAfrica has seen.
The index began indicating the end of South Africa’s economic decline in February this year, a period when the rand reached the same low levels experienced during the middle of the global recession in March 2009 and at the time when South Africa’s trade gap had widened.
BankservAfrica explained that as a now cast indicator, Beti took less than a month to get data to the market whereas other economic indicators could take up to two months.
Mike Schussler, the chief economist at economists.co.za, cautioned that those who were slashing South Africa’s growth forecasts were being too pessimistic since many forecasts were based on old information.