Advertise with fastmoving.co.za
 
 

As retail sales become the last piece in the GDP puzzle, industry analysts anticipate a weak outcome for the first quarter.
As retail sales become the last piece in the GDP puzzle, industry analysts anticipate a weak outcome for the first quarter.

Slow retail sales ‘to weigh on first quarter GDP'

ECONOMIC NEWS

By Palesa Vuyolwethu Tshandu - May 16th, 16:41

As retail sales become the last piece in the GDP puzzle, industry analysts anticipate a weak outcome for the first quarter. 

Value-added tax (VAT) absorption in retail sales seemed to have driven pre-emptive buying in April when retail trade sales recorded a 4.8% year-on-year increase. But some analysts expect this growth to plateau.

Investec chief economist Annabel Bishop said the sharp contractions in industrial production (manufacturing, mining and electricity) and retail sales in the first quarter of 2018 on a quarter-on-quarter adjusted annualised basis (the headline GDP measurement) indicated a weak outcome for first-quarter GDP growth.

On a quarter-on-quarter seasonally adjusted annualised basis — the method of calculating quarterly headline GDP growth — retail trade sales had fallen 5.2% in the first quarter of 2018, Bishop said.

She calculated that industrial production fell 6.9% and these two contractions indicated there was likely to be a weak outcome for first-quarter GDP growth, possibly even a contraction.

On Wednesday, Statistics SA reported that retail would contribute a 1.3% decline to first-quarter GDP, which it previously reported suffered a 1.7% subtraction from manufacturing sales and 2.5% subtraction from mining sales.

General dealers expanded 2.4% year on year, adding 1.1 percentage points. The biggest contribution came from clothing retailers, whose sales rose 10.6% year on year, contributing 1.6 percentage points to the headline number.

Sales of pharmaceutical, medical, cosmetic and toiletry products gained 7.9%.

Jason Muscat, First National Bank senior economic analyst, said the first-quarter trade data tended to be distorted because of Black Friday and festive season shopping.

Despite the strong performance in the first three months of 2018, the sector contracted — 1.3% quarter on quarter in the first quarter of 2018.

Muscat agreed with Bishop’s sentiments, saying “we maintain our forecast for a contraction of 1% quarter on quarter for the first quarter”.

The R1.21/litre petrol price hike in April and May would also limit consumer spending power and, as a result, retail sales growth would moderate.

Bryan Sun, MD of East and SA at Nielsen, who was speaking at the company’s 360 Consumer conference, said: “The South African consumer is not confident at the moment. There are concerns about job security and discretionary income, but we are seeing it improving. We are keeping an eye on that [VAT increase] and the sugar tax as well."

“It’s always interesting to see how people react in the basket, what they will change and what they will replace to make up for these shifts in the market.”

© BusinessLIVE MMXVIII 

Related News

Pick n Pay's new Smart Shopper changes - and plans to cut down on food wastage
16/10/2018 - 15:33
As part of its financial results for the six months ending 26 August 2018, Pick n Pay has announced a number of new changes coming to its Smart Shopper programme.

SA Citrus exports close in on 2 million tons
16/10/2018 - 15:07
Yet another important milestone has been reached by the South African citrus industry. According to Justin Chadwick, CEO of the Citrus Growers’ Association, citrus production has reached a record volume packed for export in 2018.

Walmart Canada invests $175m to modernise Canadian stores
16/10/2018 - 10:05
Walmart Canada will invest $175 million to renovate and refurbish 23 stores across Canada, as the retailer seeks to improve the integration between its e-commerce business and its physical stores.

Pick n Pay keeps inflation at bay
16/10/2018 - 09:53
Measured by the volume of groceries sold, Pick n Pay delivered its strongest six-month trade performance in five years, its interim results claimed.

SA could face another VAT increase, say experts
15/10/2018 - 15:16
Senior tax consultant Bernard Sacks told The Weekend Argus that while we will most likely have to wait until the annual budget is delivered in February to find out if a VAT increase is our fate, Tito Mboweni’s medium-term budget policy statement on October 24, his first as finance minister, may provide important clues as to what SA consumers will face next year.