Valentine’s Day demand boosts sales after slow start to the year

RETAIL sales picked up momentum in February, increasing by 2 percent yearon-year from 1.3 percent in January on Valentine’s Day sales.

Data from Statistics South Africa (StatsSA) yesterday showed, however, that the uptick was expected to be offset by the coronavirus restrictions imposed in March.

StatsSA said the knock-on effects would put sales volumes under significant pressure over the medium term as consumer demand remained mooted.

It said the largest positive annual growth rates were recorded for all “other” retailers, at 8.9 percent, with household furniture, appliances and equipment contributing 4.7 percent wile textiles, clothing, footwear and leather goods rose 1.5 percent.

StatsSA said by contrast pharmaceuticals and hardware and paint saw their sales volumes decline 2 percent and 0.5 percent year-on-year respectively during the period.

FNB senior economist Siphamandla Mkhwanazi said the Valentine’s Day demand boosted the sales after a slow footing at the beginning of the year. “We ascribe the February spike in the ‘other’ category to the generally increasing online sales in South Africa, as well as demand related to Valentine’s Day, including sales of jewellery and watches,” he said.

Mkhwanazi said they also expected a spike in the March volume sales to reflect a wave of panic buying by consumers in anticipation of the national lockdown.

He said consumer spending was, however, expected to take a significant knock due to lockdown restrictions, loss of income and heightened uncertainty, which could result in an increase in precautionary savings by high-income households.

“As such, we expect a decline in household spending in the medium to longer term, particularly on ‘non-essential’ goods,” Mkhwanazi said. He said that there were factors that could lend support to the consumer during this time.

“These include aggressively lower interest rates, rising deflationary pressures, as well as marginally lower income taxes – which should somewhat boost discretionary income,” Mkhwanazi said.

StatsSA said the seasonally adjusted volumes declined 0.4 percent from January. This followed month-onmonth changes of 0.5 percent in January and a contraction of 2.5 percent in December 2019.

In the three months to the end of February, seasonally adjusted retail trade sales decreased by 1.1 percent compared with January.

Investec economist Lara Hodes said that subdued consumer confidence, coupled with slowing nominal wage growth and dire levels of unemployment, hindered robust consumption expenditure growth.

“Retailers unable to sell non-essential goods during the lockdown have suffered with declining foot traffic in stores,” Hodes said.

“Consumer buying patterns have shifted with a surge in online shopping observed, as many consumers are apprehensive about leaving their homes during the pandemic.”

Hodes said interest rate cuts of 2.25 basis points this year, with another anticipated at today’s monetary policy committee meeting, together with petrol price declines, will have provided some relief to households.

“However, at this unprecedented time, with unemployment rates accelerating, salary cuts widespread and debt burdens rising, many households are just struggling to survive,” Hodes said.