Rand weakness to batter other sectors
FURNITURE and household appliances are not the only items that are selling slowly — the same is true of food, cosmetics and clothing.
This is according to an EY (Ernst & Young)/Bureau for Economic Research retail survey released recently.
Although retail sales accelerated during the festive season relative to sales volume in the third quarter of last year, volume growth slowed significantly in February and March.
Derek Engelbrecht, retail and consumer products sector leader at EY, said the miserable run for companies selling furniture and household appliances continued during the first quarter of this year — but the rate of decline might be easing.
The sales of furniture and household appliances contracted by 4.8% last year.
In contrast, sales of hardware, paint, glass, semidurable goods, textiles, clothing and footwear grew last year — and were in fact the mainstay of improvements in the retail sector.
However, a significantly weaker rand — it has depreciated by almost 40% in the past two years — hit the prices of household appliances, electronic goods, sporting equipment, toys, CDs, clothing and footwear.
The hike in interest rates at the beginning of the year is also likely to affect the affordability of furniture and household appliances.
The bureau’s indices measuring input costs and the prices consumers are charged in the retail sector rose to fiveyear highs during the first quarter of this year. Retailers across the spectrum talked of considerable cost pressures and hikes in selling prices.
At this stage, it is unclear whether this will turn out to be a one-off price increase or the start of an accelerating trend of rising prices.
So it was therefore not surprising that the confidence levels of retailers remained low in the first quarter of this year.
According to the survey, most retailers expect a further deterioration in sales growth in the second quarter.
“Given low consumer confidence levels, rising inflation, a slowdown in household credit extension, lost income due to strikes and the poor jobcreation prospects for the South African economy in the near term, retail trading conditions are set to remain very challenging in the coming months,” said Engelbrecht.