Advertise with

Economists expect growth of 2% in June for the sector.
Economists expect growth of 2% in June for the sector.

Retail boost could steer SA away from a recession


By Sunita Menon - Aug 12th, 12:37

A rebound in economic growth in the second quarter of the year will likely see SA avert its second recession in two years. 

Stats SA figures are expected to show a slight boost in the retail sector, which would give the economy enough room to avoid another contraction. Economists polled by Bloomberg expect the sector to have recorded growth of 2% in June.

The retail sector is an important indicator of consumer spending; accounting for just more than 60% of GDP, it drives growth in the economy.

In May, retail sales grew a surprising 2.2% – up on the 1.7% expected by economists polled by Bloomberg. The sector grew 2.7% the month before, revised upward from 2.4%.

“We anticipate another relatively steady reading in the June retail sales print, primarily supported by general dealer purchases,” said FNB chief economist Mamello Matikinca-Ngweny.

Though consumers have been under strain, Matikinca-Ngwenta said the main factors informing the expected volume growth include deep discounting, interest-free lay-by sales and muted consumer inflation pass-through.

In the first quarter, the economy was hit hard by power cuts, which dented the retail and manufacturing sectors. The economy contracted 3.2%, more than the 1.6% contraction expected by economists polled by Bloomberg.

Last week, Stats SA figures were a mixed bag, showing contraction in the mining and manufacturing sectors in June, but overall growth in both sectors in the second quarter. Mining grew a marginal 0.6% for the quarter while manufacturing production rebounded with growth of 3.5%.

“Despite the weak performance of the manufacturing sector, June activity data strengthened our view that SA returned to growth in the second quarter after a sharp fall in the first quarter,” said Capital Economics economist John Ashbourne.

Stanlib chief economist Kevin Lings said: “This should ensure that SA avoids another negative GDP performance in the second quarter, thereby helping SA avoid slipping back into a recession.”

Despite the rebound in the economy, SA is expected to grow less than 1% in 2019, adding to the woes of President Cyril Ramaphosa, who came to power on a ticket of growth and job creation.

The Reserve Bank expects growth of only 0.6% this year – far below the National Treasury projection of 1.5%, which is likely to be revised down substantially at the medium-term budget in October.

The economy has not grown by more than 2% annually since 2013 and is struggling to gain momentum, despite political changes and Ramaphosa’s efforts to boost growth and lure investment into the country.

Lower growth forecasts will weigh on the fiscus, increasing the risk that SA will lose its remaining investment-grade rating from Moody’s Investors Service, which is scheduled to make its next ratings announcement in November.Business Live 

Related News

Checkers brings world-class retail to Constantia with new flagship store
27/11/2019 - 13:01
Checkers has opened the doors to its state-of-the-art 2 330 m² flagship supermarket at the Constantia Emporium as the retailer continues to take innovation to new heights.

Woolworths carves out market share in SA
27/11/2019 - 10:11
In Australia, David Jones's sales declined 2.1%, with the company saying a store refurbishment contributed to the decline.

Push and pull strategies work together to keep consumers coming back for more
26/11/2019 - 10:20
The retail sector is under increasing pressure as consumers have shrinking disposable income in a strained economy. Maintaining share of wallet is critical. Relying solely on a push route to market strategy from manufacturers into retailers is not enough to get consumers buying products. A pull strategy needs to coexist with the push to drive brand consumption. Integrating these strategies requires intelligent and insightful decision-making. This, in turn, requires data generated through smart technology which provides line of sight across the value chain from manufacturer to distribution, retailer to the consumer.

SA expected to sow fewer maize hectares than in previous seasons
26/11/2019 - 10:06
South African farmers are expected to sow 2.8% fewer hectares of the food staple maize next season than forecast in October after the planting season was delayed by rains, a Reuters survey of analysts showed.

Exclusive leases must fall: Commission cracks whip on Shoprite, Pick n pay, Spar, Woolies
26/11/2019 - 09:57
The Competition Commission Inquiry into Grocery Retail, published on Monday, called for an end to the exclusive leases negotiated by national retail chains in all shopping malls across the country in a bid to open up access to markets for smaller players.