Wholesale sales reflect buoyant consumption growth
Business Live - Feb 17th 2012, 13:55
The latest data release from Statistics South Africa shows growth in wholesale trade sales remained robust during December 2011.
Wholesale trade sales at constant prices increased to 6.1% year on year (y/y) in December, after slowing down to 5.8% y/y in November 2011.
The increase in wholesale sales in December is in line with the impressive acceleration in domestic aggregate consumption in December as demonstrated by the rise in retail sales, which increased by 8.7% y/y.
This is further illustrated by the fact that the y/y growth in wholesale trade sales of industries linked to consumer spending increased in December performed particularly well. The growth in other household goods (except precious stones) increased fairly significantly by 12.0% y/y, albeit lower than the 20.2% recorded in November, while the growth in wholesale trade sales of food, beverages and tobacco increased fairly significantly, to 2.8% y/y, from 1.4% in November.
Furthermore, the growth in wholesale trade sales at current prices of textiles, clothing and footwear increased to 4.7% y/y in December, from 1.5% in the previous month.
Moreover, the increase in wholesale sales in December was also driven mainly by dealers in solid, liquid and gaseous fuels and related products, followed by wholesale trade sales of machinery, equipment and supplies - this continues to suggest that investment may be beginning to pick up.
The decline in the y/y growth in construction and building materials to 5.7% in December, from 16.3% in the previous month may suggest that the expected recovery in the construction and building sectors could be fairly subdued.
From a monetary policy perspective, the resilience of both retail and wholesale sale trade sales supports the Reserve Bank's stance of not reducing interest rates any further.
At the same time, one does not expect the high rate of growth in both wholesale retail sales to be sustained into 2012, partly because of lower overall economic growth and partly because of expected short-term increases in food and energy inflation which will erode growth in disposable income.
Given the rising trend of inflation at both the consumer and producer price levels, as well as the inflationary implications of the weakening of the Rand, one could see interest rates rising in the second half of next year.
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