October retail sales reflect consumer pressure

Retail prospects look bleak as households struggle with debt levels. Image: Idea go / Free Digital Photos

The subdued economy was evident in October's retail trade sales‚ which‚ at growth of 1.3% on an annual basis‚ was lower than the expected 1.7%. Forecasts among nine economists polled by I-Net Bridge ranged from -0.3% to 5.68%.

Sales increased by only 0.2% in September‚ setting the scene for a bleaker Christmas period for retailers. Measured in real terms‚ seasonally adjusted retail trade sales fell 0.4% between September and October.

This followed month-on-month changes of -0.8% in September and 1.1% in August‚ both of which were revised. Seasonally adjusted retail trade sales decreased by 0.1% in the three months ended October, compared with the previous three months‚ Stats SA said.

Stats SA said positive annual growth rates were recorded for retailers in textiles‚ clothing‚ footwear and leather goods (7.6%)‚ hardware‚ paint and glass (3.3%) and pharmaceutical and medical goods‚ cosmetics and toiletries (2%).

Economic weakness is broad based

Vunani Securities economist Ilke van Zyl said this highlighted the strong slowdown in consumption growth as well as the various demands made on individual disposable income while the newly introduced e-tolls would not help either. "The weakness is broad-based with the two positive categories still being textiles‚ clothes and footwear and hardware," Van Zyl said.

Investec economist Annabel Bishop said she did not expect a robust festive season in the retail sector.

"Retail sales growth would be below last year's levels in this period as many households battle to make ends meet," she said.

Bishop said this situation was likely to worsen next year as households were highly indebted but state administered prices were rising very rapidly and no relief was on the horizon in terms of debt servicing costs or taxation.

"Clearly the solution is to reduce government spending and lower taxation levels to promote business activity and bring households relief‚" she said.

Nedbank chief economist Dennis Dykes said households were likely to remain cautious about spending on non-essential items given the unfavourable economic conditions. The weak retail sales numbers‚ together with the inflation data released earlier‚ suggest that demand-led inflation remained contained‚ but risks remained because of the rand's weakness.