Consumers opt for bare necessities as SA heads for recession
By Lameez Omarjee - Apr 13th, 10:33
Consumers may shift their spending away from luxuries and allocate it towards essentials as economic conditions worsen, says an analyst.
Data from Statistics South Africa (Stats SA) released on Wednesday indicate that the annual rate of retail sales declined by 1.7% in February 2017. The main contributors to the annual decline include reduced sales in textiles, clothing, footwear, and leather goods by 7.6%.
There was also a 6.5% decline in household furniture, appliances and equipment. Hardware, paint and glass sales declined 5.5%.
FNB economist Jason Muscat said this might signal sales of durable and semi-durable goods will shrink in the first quarter of the year. He added consumers are more likely to allocate disposable income to “essential” household items.
“With the hope of rate cuts having all but evaporated since the downgrade, we expect another tough year for consumers despite a moderating inflation profile,” he said. However, this may translate into consumers taking on less debt. “We anticipate the shock to confidence, and ultimately consumption will lead to further household deleveraging.”
Muscat added that the declining rate also supports FNB’s view that the country is entering a technical recession. He explained that the sales growth of 0.8% since January 2017, an improvement from the 1.2% contraction from the previous month, was overshadowed by the quarterly contraction of 1.3%.
Stanlib chief economist Kevin Lings, however, said the 1.3% quarterly decline was worrying. “[This] is the worst quarterly performance in retail sales since the global financial market crisis.”
Lings explained that the decline in the quarter may be exaggerated due to the “Black Friday” sales in November 2016, which was included in the previous quarter’s data. In November 2016, retails sales jumped 3%, mainly due to “Black Friday”.
He also pointed out that the declining retail and manufacturing data shows that South Africa is slipping into a technical recession. The mining and agriculture sector should perform better for the country to avoid a recession, he explained.
Retail sales aren’t expected to improve for the rest of the year with Stanlib projecting a decline of 0.5% in 2017. Consumers will be facing the impact of tax hikes, the delayed impact of interest rate hikes, a higher fuel price and weak confidence levels.
Treasury rejects claims of calamitous job losses from sugar tax
23/06/2017 - 09:50
Treasury has rejected claims of calamitous job losses resulting from the imposition of a health promotion levy.
Consumer inflation stabilises within target range
21/06/2017 - 10:37
Consumer inflation remained within the Reserve Bank's 3%-6% target range in May, with the consumer price index (CPI) ticking up to 5.4%, from 5.3% in April.
Wary consumers in no rush to spend big
20/06/2017 - 12:07
The South African economy has a long history of the tertiary sector (consumption side) being a resilient pillar of growth, but this long, unbroken run was shattered with the release of the GDP figures for the first quarter of the year. The numbers showed that the sector contracted by a full 2% quarter on quarter.
Better rains wash away some dairy woes
18/06/2017 - 14:21
Better summer rains have helped the dairy industry, but drought in the Western Cape, cost pressures and consumer resistance to price hikes remain a challenge.
Big decline in consumer goods industry
14/06/2017 - 13:36
Consumer goods companies have been through the mill due to a slowdown in consumer spending, with interim earnings of 13 JSE-listed companies falling an average of 15%.