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Retail South Africa

Weak retail sales indicate low GDP: Economists

Weaker retail trade sales growth, coupled with other recently released disappointing economic data, are an indication that growth in the second quarter (Q2) could have faltered, some economists forecast. Stats SA is expected to release the second quarter GDP data on August 30.
Weak retail sales indicate low GDP: Economists

Retail sales grew 2.2% year on year (y/y) in June from a revised 0.2% in May (0.0%), figures from Stats SA released on Wednesday showed.

Jeff Schultz, an economist at Absa Capital, said that even more important than the headline retail sales figure was that momentum growth in retail sales had slowed down significantly in the first quarter.

Sales growth, he said, moderated to just 0.6% in the second quarter after growing 5.8% in the first quarter.

"Given the 14% weighing of the trade sector to SA's gross value-add, the slowdown in this component is also likely to weigh on second quarter GDP growth," Schultz said.

Some sectors score...

In terms of the 2.2% y/y growth, the highest annual growth rate was recorded for retailers in pharmaceutical and medical goods, cosmetics and toiletries, with 9.2%; followed by retailers in household furniture, appliances and equipment, with 6.2%; and general dealers, with 3.4%.

There was persistent downward pressure on household consumption expenditure, according to Colen Garrow, Brait economist.

Higher price adjustments affecting households, Garrow said, included higher costs such as electricity tariffs, the higher trend in fuel prices, food and inflation, property taxes, and a number of other administered prices covering utilities.

On a month on month basis, retail trade sales growth rose 2.0% in June compared with May, following month on month changes of -4.8% in May and 2.8% in April.

Loss of momentum expected

Retail sales for the second quarter of 2011 reflected an increase of 4.1% compared with the second quarter of 2010.

Nedbank economists expected growth in retail sales to lose some momentum during the second half of the year as base effects diminished.

"Furthermore, the support from income growth is likely to be partly offset by fragile consumer confidence on the back of high debt levels, the weak job market and increasing cost pressure from administered goods and services," the Nedbank economists said.

An increasing number of analysts and economists were expecting the SA Reserve Bank (SARB) to keep lending rates on hold for the rest of the year given the still-weak economic indicators.

Source: I-Net Bridge

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