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The three-month seasonally adjusted figure, which is used to calculate GDP, came to 1.5% in September.
The three-month seasonally adjusted figure, which is used to calculate GDP, came to 1.5% in September.

Uptick in retail sales likely enough to end recession

ECONOMIC NEWS

By Sunita Menon - Nov 16th 2018, 10:00

A meagre boost in the retail sector will likely see SA steer out of the recession. 

Despite headwinds to the consumer — including a VAT increase, weak household credit extension, depressed sentiment, and a mounting fuel price burden — relatively benign inflation and interest rates helped growth in the sector, according to analysts.

September’s retail sales increased by a meagre 0.7% from the same month in 2017, less than half the economists’ consensus of 1.9%, according to a poll by Bloomberg.

While the retail sales figures compared to a year ago were disappointing, the rise over the quarter indicates that the economy saw growth off a very low base in the third quarter.

The three-month seasonally adjusted figure used to calculate GDP, came to 1.5% for September, compared to the previous quarter. Following manufacturing and mining figures last week, the uptick in retail sales may boost growth slightly when Statistics SA publishes its third-quarter GDP report next month.

Consumer spending accounts for 60% of GDP and is seen as a catalyst for economic recovery. GDP contracted in the first and second quarters, placing the economy in recession for the first time in almost a decade. Economists define a recession as two consecutive quarters of GDP decline.

“September activity data released over the past week has been pretty downbeat. But conditions still seem to have improved in recent months, supporting our view that the economy returned to growth in the third quarter,” said Capital Economics economist John Ashbourne.

However, growth will likely remain low. “The rate of improvement in the SA economy remains very unconvincing,” said Stanlib chief economist Kevin Lings.

While September’s performance was muted, analysts expect a fuel price decrease in December to give consumers some breathing room. “We suspect the accumulation of fuel price hikes in the preceding months left consumers far more circumspect, given the currency and oil price volatility at the time,” said FNB senior economic analyst Jason Muscat.

“We expect to see some relief for consumers in the final quarter of the year as hefty fuel price cuts and decent real wage growth ease strained household finances,” he said.
Business Live 

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