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Data from Statistics South Africa (StatsSA) showed that retail sales in April increased 2.4percent year-on-year.
Data from Statistics South Africa (StatsSA) showed that retail sales in April increased 2.4percent year-on-year.

Increase in sales reflect stronger second quarter

ECONOMIC NEWS

By Kabelo Khumalo - Jun 13th, 10:41

Data from Statistics South Africa (StatsSA) showed that retail sales in April increased 2.4percent year-on-year - the strongest gain in retail trade in six months, providing further evidence that the economy began the second quarter on a firmer footing following the first quarter’s 3.2percent plunge. 

Month-on-month, retail sales advanced 0.8percent from a 0.7percent decrease in March.

StatsSA said the rise in retail sales was on the back of a strong showing by pharmaceuticals and medical goods, cosmetics and toiletries, textiles, clothing, footwear and leather goods, household furniture, appliances, and equipment.

FNB economist Siphamandla Mkhwanazi said the month-on-month jump in sales could be attributed to increased shopping activity during the Easter holidays.

“While the April print is a welcome development, pressure on consumers’ discretionary income via weaker labour markets and higher income taxes is expected to keep shopping activity relatively muted this year,” Mkhwanazi said.

“However, the increasing unsecured credit uptake mainly by higher-income consumers, as well as our expectation of a cut in interest rates in July, could provide auxiliary support to retail sales volumes in the coming months.”

The upbeat retail sales came just a day after the statistics agency said the key manufacturing sector showed a strong rebound in the second quarter, with output for April reaching a three-year high.

Output in the manufacturing sector, which was one of the main negative contributors to the shock gross domestic product (GDP) plunge in the first quarter, rose 4.6percent on an annualised basis in April, the biggest rise since June 2016, as load-shedding concerns faded in the month.

StatsSA is set to release April’s mining production data today, which will complete April’s activity data.

Last week, ratings agency Moody’s warned that the first quarter’s poor GDP print pointed to the high possibility of a technical recession in South Africa.

But the available April activity data has shown that the economy strengthened at the start of the second quarter.

Investec economist Lara Hodes said a meaningful lift in consumer and business confidence was required to drive private-sector fixed investment and, therefore, growth and employment before we saw any significant pick-up in consumer spending.

“Key policies need to be continuously reviewed, successfully implemented and transparently laid out in order to foster policy certainty among South Africans, and propel a lift in sentiment,” Hodes said.

Meanwhile, research from the South African Chamber of Commerce and Industry (Sacci) showed trade conditions improved in May.

Sacci’s Trade Activity Index improved to 41 points last month from 37 points in April.

Sacci said last month’s election results improved expectations for better economic conditions and the business climate in the short to medium term. 

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