Retail sales slow down more than expected

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Retail sales are one of the main indicators of spending‚ and a moderation in their growth is in line with the rising cost of living households are having to deal with.

Petrol prices have increased a cumulative 75c/l since the beginning of the year‚ while food prices have also been rising. The slower growth rates are in line with moderate economic expansion‚ which most analysts expect for this year.

Statistics South Africa figures on Wednesday showed that retail trade sales growth slowed to 2.2% year on year in February‚ from a downwardly revised 6.4% (previously 6.8%) and against a BDlive forecast of 3.2%.

The forecast was a consensus from a survey of 13 economists. Sales fell 0.2% on the month.

Cadiz Asset Management economist Adenaan Hardien said it was "too early" for the increase in the prime interest rate to 9% in January from 8.5% to be reflected in the latest retail sales data.

Retail sales have been known to rise strongly mainly due to base effects. But Mr Hardien said the effect of "an increased number of foreign tourists" buying local goods could have played a role. The weak rand makes South Africa more attractive as a holiday destination.

Retail sales are expected to grow only moderately in coming months as consumer disposable incomes come under increased pressure. More interest rate hikes are expected this year and electricity tariffs will rise from July.

FNB household sector strategist John Loos expected real retail sales growth to settle into an average range of between 1.5%-2.5%.

Investec chief economist Annabel Bishop said wage increases were likely to match inflation in the public and private sectors but were unlikely to be "enough to fully cover the rise in debt servicing costs".