Retailers remain pessimistic about business conditions in the short-term

SOUTH African retailers remain pessimistic about business conditions in the short-term, despite a spike in confidence levels.

The Bureau for Economic Research (BER) yesterday said retailer confidence climbed to a seven-year high in July, notwithstanding looting and trade restrictions.

It said retailer confidence inched up marginally by two index points to reach a seven-year high of 56 points in the third quarter, up from 54 points in the second quarter.

BER economist Tshepo Moloi said confidence was largely driven by food and beverages, and hardware retailers, on the back of improved sales volumes in these categories.

Moloi said while this was certainly a positive development, especially in the aftermath of violent protests and stricter trade restrictions amid a third wave of Covid-19 infections, this confidence was unfortunately not broad-based.

He said tighter lockdown restrictions at the start of the third quarter had also left consumers immobile, to some extent, and reluctant to visit malls and shopping centres.

“Despite this improvement in sentiment, retailers faced a tough operating environment overall,” Moloi said.

“Furthermore, persistent global supply chain bottlenecks continue to create an unsettling business environment for retailers.

“Several retailers have also flagged cash flow problems and reduced earnings, given South Africa’s weak labour market, [and] discretionary spending remains constrained among low- and middle-income earners in particular.”

According to the latest data from Statistics SA, real retail trade sales fell by 0.8 percent in July, following a 10.4 percent hike in June.

The main negative contributor to this decrease was general dealers.

Stats SA said seasonally adjusted retail trade sales decreased by 2.9 percent in the three months ended July, compared to the previous three months.

The latest BER Retail Survey also suggested that retail sales volumes declined in the third quarter, largely weighed down by sales of clothing and furniture.

Moloi said the overall decline was somewhat expected considering that retailers were trading under more stringent lockdown restrictions for much of the third quarter of this year, compared with the same period last year when the country was operating under adjusted alert level 1 conditions.

“The effects of the civil unrest, a weak labour market, the ongoing Covid-19 pandemic and global supply chain disruptions remain causes of uncertainty for the sector,” he said.

“However, on a more positive note, the recently announced fiscal support should boost household income by an estimated R40 billion over the next six months,” Moloi said.