From an interest rate perspective, consumers are likely to remain under pressure as the central bank is unlikely to decrease interest rates any time before the end of this year, given the upside risk to the inflation outlook due to the weaker rand.
Year-on-year (y/y) growth in retail sales increased marginally to -5.0% in September from -5.6% in August (previously -5.5%), to record the fifth consecutive month of negative growth.
The latest figures continue to highlight the distress faced by consumers given the lagged effects of increases in domestic interest rates and uncomfortably high debt levels.
On the inflation front, implied inflation (measured as the difference between nominal and real retail sales growth) declined in September to 16.1% from multi-year high of 16.7% y/y in August.
The latest decline in implied inflation was in line with the fall in both CPIX and CPI inflation, which suggested a reversal of the upward trend that has persisted for the past year or so.
The apparent reversal can be attributed to the retreat in commodity prices over the past few months, particularly the oil price.
However, the domestic inflation outlook is not out of the woods yet, as the weakness in the rand/dollar exchange rate will keep inflationary pressures buoyant.
This is discouraging as continual weakness in the rand may ensure that interest rates remain higher for longer.
A breakdown of the nominal categories in retail sales shows that growth in four categories posted declines in September, while the other remaining three categories recorded increases.
Growth in dealers of specialised food and beverages decreased to 11.4% in September from 11.7% in August; clothing and footwear fell sharply to 5.6% from 17.0%; hardware, paint and glass slowed down to 6.8% from 8.5%; and furniture and appliances declined from -4.6% to -8.0%.
The breakdown of retail sales growth according to dealer for September shows that the dealers that endured the biggest knock were those involved in sales of those products which are associated most intensively with credit extension.
On the other hand, growth in pharmaceutical and medical goods, cosmetics and toiletries increased to 24.9% in September from 14.9% in August and all other retailers increased significantly to 13.8% from -28.8%.
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