Retail trade seen at 6.9% y/y Jul vs 7.4%

Real retail sales expanded by a stronger than expected 7.4% y/y in June from an increase of 4.5% y/y in May, according to Statistics South Africa. The general dealers, retailers of clothing and footwear and household furniture and equipment have been the key contributors to the improvement in recent months, accounting for up to half of this growth.

One of the participants in the survey said that retail sales have been supported by low base levels and the temporary additional demand created by the hosting of the World Cup.

"In the July data we could see effects of the tail end of the World Cup spend seep into the data as well, a slippage in retail spending towards the end of the year is plausible, given debt overhangs and stringent financial conditions.

"While consumer confidence remained broadly positive and essentially unchanged over the last three quarters, concerns going forward stem from the cautious outlook for the financial position of consumers in 12 months' time," economists from one of the groups polled said.

Consumers still cautious

The economists added that consumers, except for high-income earners, are still hesitant to commit themselves on a large scale to purchase big-ticket items.

Another participant in the survey said that the real retail sales growth acceleration to a solid 7.4% year-on-year (y/y) pace in June was the highest reading since June 2007, and largely in response to impetus from the FIFA World Cup. However, the group of economists said that the seasonally- adjusted month-on-month (m/m) increase of 1.8% suggests that such an impact was not as strong as some people had anticipated.

"In July, we expect that the World Cup continued to have a positive impact on sales, but because there were more matches and probably also, more tourists in June, this is unlikely to translate into additional momentum compared with June.

"We look for a marginal decline in retail sales on a m/m seasonally adjusted basis, which combined with less favourable base effects, should result in a drop in the y/y growth rate to around 6.0%," the group of economists said.

They added that nominal retail sales growth should also slow, as inflation in the retail sector appears to be stabilizing at a low level.

The July retail trade sales data will be released by Statistics South Africa at 11.30am on tomorrow.