Economists warn May retail growth not sustainable

Analysts‚ however‚ warn that much of the growth was attributed to base effects and that these growth levels might not be repeated in the months ahead as consumers come under heavy cost pressures.

Retailers in hardware‚ paint and glass; and those in textiles‚ clothing‚ footwear and leather goods contributed significantly to the 6.4% growth.

Annabel Bishop‚ economist at Investec Group‚ said the uptick in retail sales growth would likely allay some recent concern that the economy was in the process of experiencing a sharp slowdown in growth.

Stanlib economist Kevin Lings said that on a trend basis‚ there was some evidence to suggest South African retail activity was facing increasing strain in 2012.

This‚ he said‚ was partly because consumers had to cope with a range of cost increases that were eroding their retail spending power - including energy and transport costs‚ education fees‚ medical services and water.

Another data release on Wednesday supported views that consumer spending would be subdued in the rest of 2012. The FNB/Bureau for Economic Research consumer confidence index plummeted eight points to -3‚ a level last seen in the fourth quarter of 2008.

Cees Bruggemans‚ chief economist of FNB‚ said that in all‚ the figure suggested growth in household consumption expenditure‚ which has been the mainstay of domestic economic growth over the past two years‚ would be much slower during 2012.

"A confluence of adverse economic and political developments has been gradually weighing down SA's economic prospects‚ and it appears as though consumers have now also capitulated by making a significant downward revision to their expectations‚" Bruggemans said.

The index‚ conducted in May‚ combines the results of three questions posed to adults in SA. Participants are questioned on three main points: the expected performance of the economy‚ the expected financial position of households and the rating of the appropriateness of the present time to buy durable goods such as furniture‚ appliances and electronic equipment.

During the quarter‚ consumers' rating of the prospects for the national economy‚ the outlook for their own finances and the appropriateness of the present time to buy durable goods all deteriorated notably.

The economic outlook subindex of the consumer confidence index dropped from four to -5 index points‚ indicating that most consumers now expect the economic situation in SA to worsen over the next 12 months.

The decline in the economic outlook subindex reflected the recent deterioration in global economic sentiment‚ as well as in the domestic political climate.

The percentage of consumers expecting their financial position to improve over the next 12 months slumped from 16 index points to eight in the second quarter. After peaking at 25 in the third quarter of 2010‚ the financial position subindex of the consumer confidence index declined gradually throughout 2011 and was currently at a four-year low.

"The deterioration in the outlook for the financial positions of households can be ascribed to a slowdown in employment growth and moderating wage inflation‚ coupled with the increase in the household tax burden and significantly lower growth in social grants expenditure announced in the February 2012 budget‚" Bruggemans said.

Having declined from -2 to -6 index points‚ the subindex for the time to buy durable goods fell further to a two-and-a-half-year low of -11 index points during the second quarter.