Retail sales growth higher than expected in August

Growth in retail trade sales at constant prices increased more than expected by 6.4% year on year (y/y) in August after a downwardly revised 2.9% [4.2%] increase in July‚ figures released on Wednesday, 17 October 2012, by Statistics SA showed.

This increase was somewhat greater than the forecasts of a 4.6% rise.

Nedbank economist Johannes Khosa attributed the increase to low interest rates‚ unsecured lending and above-inflation wage increases.

Figures showed that the highest annual growth rates were recorded for retailers in textiles‚ clothing‚ footwear and leather goods; hardware‚ paint and glass; and household furniture‚ appliances and equipment.

Measured in real terms‚ seasonally adjusted retail trade sales increased 2.0% in August compared with July following month-on-month changes of -0.1% in July and 1.7% in June.

Despite the improvement in August‚ it appeared that consumers might start tightening their purse strings according to Standard Bank economist Shireen Darmalingam.

She said that consumers still appeared fairly pessimistic as indicated by the third quarter consumer confidence index‚ which remained in negative territory at -1 point.

Other factors such as high food and fuel costs‚ unemployment‚ and indebtedness would impact negatively on consumer spending.

"Household debt is rising in SA and as a ratio of disposable income has started to climb as well‚ which means that the SARB [Reserve Bank] should be cautious in easing interest rates further as this would encourage further credit usage‚" Annabel Bishop‚ economist at Investec Group said.

The Nedbank economics unit noted that the risks to the domestic economy remained on the downside‚ implying monetary policy would likely remain accommodative for longer.