Retail trade seen at 2.7% in June

16 Aug 2011

South African retail trade sales at constant (2008) prices for June are expected to have recovered some ground and increased to 2.7% year-on-year (y/y), after a y/y growth of 0% in May, according to a survey of leading economists by I-Net Bridge.

Forecasts among the eight economists ranged from -1.0% to 3.5%.

Absa Capital economist Gina Schoeman said June's retail sales figure would be keenly watched because it provided the final piece of the second quarter Gross Domestic Product (GDP) picture.

"Second quarter retail sales have followed a rather roller-coaster path so far, soaring to 10.0% y/y growth in April before falling hard to 0.0% y/y in May - we think some revisions may be in store this week.

"For June, we think retail sales growth could have risen towards 3.0% y/y, which would be above market expectations. Our reasoning is based on the listed retail sector reporting firm second quarter sales growth for both food and clothing/footwear, two categories that make up two-thirds of overall retail sales," Schoeman said.

She added that the bottom line for Absa Capital was that even if June retail sales exceeded consensus estimates, it would still be too little to prevent the retail, catering and accommodation sector from slowing or possibly even declining in the second quarter of 2011.

"Together with last week's manufacturing production figure, our tracking estimate leaves us expecting second quarter GDP to come in under 2.0% quarter-on-quarter (q/q) seasonally adjusted annual rate (saar), a significant slowdown from the impressive 4.8% saar in the first quarter of 2011," she added.

Meanwhile, Standard Bank economists Adriaan du Toit and Shireen Darmalingam said they expected a recovery in retail sales growth for June.

"Growth in retail sales stalled in May, markedly lower than the consensus estimate of 7.2% y/y and our own expectation of 5.8% y/y. Indeed, the month-on-month (m/m) decline of -4.7% seasonally adjusted was the biggest on record, since 2002, and has put paid to our initial expectation that the surge in April of 10.0% y/y was inflated by the series of holidays in April.

"Although some retail sectors continued to expand sales on a y/y basis in May - like household furniture and appliances at 6.3% y/y, general dealers at 4.0% y/y and pharmaceutical and medical goods at 3.8% y/y - sharp declines were recorded in sales of hardware, paint and glass at -8.5% y/y and food, beverages and tobacco at -8.4% y/y," they said.

They added that although they expected a rebound in sales growth on a m/m basis, the y/y growth rate is expected to remain relatively depressed at 3.5% y/y.

"With manufacturing production losing steam in the second quarter of 2011, a modest growth print for retail sales for June could reinforce our expectation of relatively lacklustre GDP growth in the second quarter of 2011," the economists added.

The June retail trade sales data will be released by Statistics SA at 1pm on Wednesday, 17 August.

Source: I-Net Bridge

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