Sharply slower retail sales growth adds to gloomy economic picture

Retail sales grew 2.8% year on year in March, compared with 4.1% in February, Statistics SA said on Wednesday. Global economic data collator Trading Economics' consensus forecast for retail sales growth was 3.6% year on year.

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Consumers are cutting back spending as they struggle with high unemployment, rising living costs and higher interest rates. Retailers, in turn, are having to cut their margins to try to maintain sales.

Positive annual growth rates were recorded for:

• general dealers (6%);
  
• retailers in textiles, clothing, footwear and leather goods (4.9%);
  
• retailers in food, beverages and tobacco in specialised stores (0.3%); and
  
• retailers in pharmaceuticals and medical goods, cosmetics and toiletries (0.3%).

The main contributor to the 2.8% increase was general dealers (contributing 2.5 percentage points).

Seasonally adjusted retail trade sales increased 0.2% month on month in March 2016. This followed month-on-month changes of 0.4% in February 2016 and -0.8% in January 2016. In the first quarter of 2016, seasonally adjusted retail trade sales increased 0.2% compared with the previous quarter.

Retail trade sales increased 3.4% in the first quarter of 2016 compared with the first quarter of 2015. The main contributors to this increase were:

• general dealers (4.5% and contributing 1.8 percentage points); and
  
• retailers in textiles, clothing, footwear and leather goods (4% and contributing 0.8 of a percentage point).

Investec chief economist Annabel Bishop has pointed out that during the boom years of 2003-2008, retail sales growth averaged above 7% and gross domestic product (GDP) growth was 4.5%.

GDP grew just 0.6% year on year in the fourth quarter, with growth slowing in every quarter of last year.

The Reserve Bank has raised the repo rate by a cumulative 75 basis points this year, and most economists expect it to keep it unchanged when its monetary policy committee makes its decision on Thursday.

Consumer inflation data released on Wednesday bolstered that view. Although the consumer price index (CPI) grew 6.2% year on year in April - outside the top of the Bank's 3%-6% target range - it came in as expected and continued the moderating trend seen in recent months.

Employment data released earlier this month showed the unemployment rate rose to 26.7% in the first quarter, from 24.5% in the fourth quarter of 2015, after the economy lost 355,000 jobs.

Source: BDpro