Retail trade sales drop 4%

The drop in trade figures, which is the seventh consecutive decrease, is evidence of South African consumers spending less in the current economic climate of high interest rates and diminishing disposable income levels.

“Retail trade sales at constant prices for the first eleven months of 2008 reflected a decrease of 2.4% compared with the first eleven months of 2007, while growth for the same period in 2007 was 5.8%,” Stats SA said.

Retail trade sales at current prices for the three months ended November 2008, however, increased by 11.4% compared with the three months ended November 2007.

The major contributors to this increase were general dealers, retailers in textiles, clothing, footwear and leather goods, retail trade in specialised food, and beverages and tobacco stores.

Retailers in household furniture, appliances and equipment contributed negatively to the change in retail trade sales, Stats SA said.

Retail trade sales at current prices for November 2008 also increased by 10.7% compared with November 2007, while sales for the corresponding period in 2007 increased by 8.7%.

The further drop in retail trade figures augurs well for another cut in interest rates when the Reserve Bank's Monetary Policy Committee (MPC) meets again in February.

Tightening monetary policy as part of an attempt to rein in inflationary pressures has led to a contraction in demand for credit, which in turn, has led to a decrease in spending on goods and services which boost the economy.

South Africa's Gross Domestic Product (GDP) is forecast to just stay in positive territory for most of 2009, economists predict.

With the global economic recession intensifying and global demand for commodities dropping, the strength of the Rand and conditions on international markets will be some of the biggest factors for the MPC to consider when deciding on interest rates.

Article published courtesy of BuaNews