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 2018, 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

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.