Uptick in April retail sales figures ‘not sustainable’
By Sunita Menon - Jun 15th 2017, 13:09
Despite a grim performance in the first quarter, SA’s retail sector surprised on the upside in April, though depressed consumer confidence is expected to keep retailing constrained.
According to Statistics SA, retail sales rose 1.5% year on year in April 2017 to R60.6bn. The data reflects overall spending as a driver of the economy.
The Rand Merchant Bank and Bureau of Economic Research business confidence index released on Wednesday indicated that retail confidence had fallen by 10 index points to 35 in the second quarter based on weak consumer spending.
Nedbank economist Johannes Khosa said though retail sales growth for April was stronger than expected, general domestic spending was weak and the recovery was patchy.
The increase in sales growth in April was driven by general dealers and food retailers, which contributed 3% to total sales growth.
Khosa warned, however, that strong retail sales growth is unlikely to be sustained in the months ahead.
“Households are likely to be cautious of spending as consumer confidence remains weak due to poor economic growth, the potential for further downgrades of SA’s credit rating as well as poor employment prospects and the country’s deteriorating political environment.”
Earlier this month, GDP figures showed that SA’s economy was in recession after a second successive quarterly contraction (of 0.7%) in the first quarter of 2017, while unemployment numbers came in at a 14-year high at 27.7%.
Macro fundamentals in the economy did not support stronger retail sales growth in 2017 from 2016, said Standard Bank economist Thanda Sithole.
“Even though consumers are likely to get some relief from moderating inflation, strong sales growth will persistently be hindered by subdued growth.”
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