Retail strong, but not strong enough


Facebook Twitter LinkedIn Google+ Grapevine News | The Latest Updates on Franchising


Trolley with TV
While most categories of consumer spending appear solid in South Africa and spending is set to expand further, the sector cannot lay claims to being vibrant.
Data on Wednesday showed that South African retail trade sales at constant (2008) prices for October increased by 6.1% year-on-year (y/y) after a revised 6.0% (6.1%) growth in September.Better than expected

This outcome was slightly better than market expectations of 6.0%, but still fails to stir up enormous confidence.

Analysts are not shouting about broad-based fast growth based on these sorts of numbers. Without jobs growth, proper cohesive growth will simply not be achievable.

The current range of consumer related economic data would suggest that consumer spending can continue to expand at a solid pace into 2011; but will ultimately lack absolute vibrancy without an increase in employment, says Stanlib’s economist Kevin Lings.

And Nedbank’s economics unit feels that while the data provide further evidence that consumption continues to recover, other recent economic releases suggest that the overall economic recovery remains fragile, with production still taking strain.

Rates review

So where does leave the central bank?

We expect the Reserve Bank’s Monetary Policy Committee (MPC) to keep interest rates steady throughout next year before starting to hike towards the middle of 2012, according to the Nedbank economists.

Strong sales

Growth in retail sales came in stronger than expected, at 6.1% in September, from the 4.6% in August, partly marking gains from the ending of the public sector strike.

Retail sales were expected to have remained firm in October, supported by attractive retail prices and low interest rates, according to one of the economists surveyed before the results.

The data bore this out with strong sales shown to be recorded in the textiles, clothing, footwear and leather goods as well as household furniture, appliances and equipment categories.

Retail sales are likely to remain strong in November and December, reflecting a low base effect in 2009, better consumer confidence and a boost from festive spending. However, sales are likely to experience softer growth during 2011 as base effects diminish.

Adjusted figures

Measured in real terms (constant 2008 prices), seasonally adjusted retail trade sales increased by 0.7% in October 2010 compared with September 2010.

This followed month-on-month changes of 0.4% in September 2010 and -1.4% in August 2010.

The highest annual real growth rate was recorded for retailers in pharmaceutical and medical goods, cosmetics and toiletries (17.4%), followed by retailers in household furniture, appliances and equipment (17.1%), and retailers in textiles, clothing, footwear and leather goods (9.2%).

Real trade terms

Retail trade sales in real terms rose by 5.6% in the three months ended October 2010 compared with the three months ended October 2009. The main contributors to the increase of 5.6% were general dealers (4.8% and contributing 1.9 percentage points), retailers in textiles, clothing, footwear and leather goods (8.0% and contributing 1.5 percentage points) and retailers in household furniture, appliances and equipment’ (18.2% and contributing 1.0 percentage point).

Retail sales are not due to push economic growth up strongly – forecasts now vary between 2.8-3% in 2010 – well off the 7% required to knock unemployment and create five million jobs in 10 years.

Source: Bizcommunity.com
Comments