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Sales volumes biggest in six years.
Sales volumes biggest in six years.

Retail sales volumes highest in six years


By Michelle Gumede - Mar 15th 2018, 10:42

The discretionary spending power of consumers is slowly returning as inflation slows and the rand strengthens.

This was evident among Mastercard users in the country whose spending habits resulted in greater sales volumes than each of the five previous January periods.

According to the Mastercard SpendingPulse January 2018 report, which provides a macroeconomic analysis of retail spending trends in SA, not only was it a record period, but consumer spending for January climbed 3.8%.

This spending was the same pace of growth the retail industry had witnessed during the December peak season.

Senior vice-president and group head of market insights for Mastercard Sarah Quinlan attributed the January sales growth to a moderation in inflation, a stronger rand and some recovery in industries such as agriculture as production recovers from the severe drought.

The SpendingPulse report said that including the effects of inflation, retail sales for January 2018 grew 7.3% year on year.

Inflation had contributed just 3.5 percentage points to overall sales growth, the lowest levels seen since SpendingPulse began tracking trends in the country in 2013.

Economic analyst at FNB Jason Muscat highlighted that at 4.4% in January, inflation was a full 2.2 percentage points below the January 2017 number, "providing consumers with a good measure of relief".

Given that inflation had been trending lower for more than a year, the Reserve Bank had cut interest rates by 25 basis points in 2017 and he said there was scope for another cut later in March, which would provide easier monetary conditions.

"This is good news for indebted consumers, as it means the cost of servicing debt will moderate, albeit slightly," said Muscat.

Quinlan was upbeat about the outlook for 2018, saying that "we are seeing a healthier economic outlook with a possibility of stronger wage and employment growth in the months to come".

However, Muscat warned that despite the good news, headwinds were expected for consumers due to the tax increases announced by former finance minister Malusi Gigaba in February.

"VAT [value-added tax] will increase by one percentage point, 52c a litre will be added to the fuel price, and many taxpayers will be paying more income tax, all of which will curb a more robust rebound in household consumption," Muscat said.

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