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Slower retail sales growth in July may lead to Bank holding rates
Slower retail sales growth in July may lead to Bank holding rates

Slower retail sales growth in July may lead to Bank holding rates

ECONOMIC NEWS - Sep 16th 2016, 14:26

RETAIL sales increased at their slowest pace in one-and-a-half years in July, with data showing that household furniture, appliances, and equipment retailers were taking the most strain. 

Retail industry players and analysts attributed the sharp declines in household furniture, appliances and equipment retail sales to stricter lending criteria and a preference by consumers to shun spending on big-ticket items during tough economic times.

Retail sales grew 0.8% in July compared with the same month a year ago after increasing 1.4% in June, Statistics SA data showed on Wednesday. While most of the retailers contributed positively to retail sales, the household furniture, appliances and equipment retail category fell 8% shaving off 0.4 of a percentage point from headline retail sales.

The sales of furniture and those of electrical goods tended to be the most affected said Consumer Goods Council of SA CEO Gwarega Mangozhe.

"There was no doubt that, to manage bad debts and promote responsible credit provision, retailers were beginning to be more judicious in providing credit," he said.

First National Bank senior industry analyst Jason Muscat said: "It is really a combination of a consumer that is under pressure to focus on necessities rather than discretionary goods, and a credit environment which continues to slow. Credit-lending criteria has tightened up since July, in line with regulation which is also putting pressure on durable goods sales."

The latest retail sales data, which strongly suggest that consumer spending is under pressure, support views that the Reserve Bank may leave interest rates unchanged on September 22.

The Bank may leave rates unchanged mainly on expectations of a better inflation outlook in 2016, said senior economist at Old Mutual Investment Group Johann Els.

Tighter financial conditions, weaker levels of consumer confidence and unfavourable job market conditions are among factors that continue to weigh heavily on the consumer, Standard Bank economist Thanda Sithole said.

The slowdown in retail sales also provides another strong confirmation that the high economic growth recorded in the second quarter will not be repeated in the third quarter. Recently published mining and manufacturing output data slowed sharply.

While consumer spending was likely to remain depressed in the months leading up to the festive shopping season, "we are, however, confident that, notwithstanding the economic climate, there will be some pockets of fairly robust sales albeit off a base of subdued trading", Mangozhe said.From DFM Publishers (Pty) Ltd 

Read more about: retail | inflation | economy

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