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Retail trade sales show consumers still under pressure

Annual retail trade sales held up slightly better than expected in April but the sector is continuing to lose momentum on a quarterly basis as consumers tighten their belts amid the tough economic climate.
Retail trade sales show consumers still under pressure
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Retail sales increased by 1.8% year on year in April 2014‚ slightly above a consensus expectation fore a rise of 1.6% and better than the 0.8% growth rate achieved in March.

Retail sales are an important gauge of the health of the South African consumer and of the overall state of domestic consumption which is a key demand-side driver of the economy.

According to the Reserve Bank's Quarterly Bulletin also published on Wednesday‚ total household consumption growth slowed to 1.8% in the first quarter (quarter on quarter seasonally adjusted and annualised) - the slowest rate of growth since the global financial crisis.

"Today's retail sales data continue to point towards a subdued trend in consumer spending‚" said Nedbank's economics unit in a statement. "Household financial conditions and consumer confidence remain weak. This will contain spending growth in the months ahead."

Consumers' disposable income is being eroded by high debt levels and rising inflation. In addition‚ high unemployment‚ weak economic growth‚ tighter lending conditions and the prospect of rising interest rates are all weighing on spending.

Investec chief economist Annabel Bishop said that on a quarter on quarter seasonally adjusted and annualised basis‚ retail sales fell by 3.1% in April‚ joining mining and manufacturing which are also contracting on the same measure.

"This does not bode well for the second quarter GDP (gross domestic product) outcome‚" said Bishop who expects economic growth to come in below 1% year on year for the first half of 2014.

In April‚ the highest annual growth rates were recorded for retailers of food‚ beverages and tobacco in specialised stores (4.7%) followed by retailers in the textiles‚ clothing‚ footwear and leather sub-sector (3.9%).

Compared to March‚ seasonally adjusted retail trade sales were flat in April. This followed month-on-month changes of -1.1% in March and -0.4% in February.

Nedbank is hopeful that a significant improvement in retail sales growth will be experienced during the second half of the year due to base effects and the resolution of the platinum mining strike.

Source: I-Net Bridge

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