Retail sales growth slows with spending

© sheelamohanachandran - Fotolia.com

Retail trade sales increased by 2.1% in August compared to 2.4% a year ago‚ Statistics SA figures showed on Wednesday, 15 October 2014.

Although the increase was modest‚ it is an indication the retail sector will contribute to economic growth in the third quarter.

SA needs growth from all sectors after disappointing performances by its biggest sectors such as manufacturing and mining due to strikes.

Retail sales rose by 0.6% month on month after an increase of 1.2% in July and minus 0.8% in June.

The weak retail sales are in line with low consumer confidence.

The Bureau for Economic Research and First National Bank's (FNB's) consumer confidence index fell to minus 1 in the third quarter from 4 in the second quarter.

FNB economist Alex Smith said the reading was "well below that post-apartheid average for consumer confidence of 5"‚ adding that consumers indicated they were "relatively bearish" about the outlook for the economy. "This bearishness tends to translate into caution over the purchase of big-ticket items like furniture and vehicles‚" he said.

Figures showed that growth in the sales of household furniture‚ appliances and equipment slowed to 0.3% year on year from a 0.7% increase in July.

Statistics SA figures showed the main contributors to the 2.1% increase in retail sales were general dealers and retailers of hardware‚ paint and glass as consumers were spending on lower-ticket items rather than more expensive goods.

Factors such as high electricity and water costs‚ high inflation and rising interest rates were weighing on consumers' disposable incomes.

Smith said the consistent slowing trend in household credit‚ under-pressure private sector employment and barely aboveinflation wage growth could imply modest retail sales growth in the few months ahead.

Although food prices have come off record highs‚ they remain a burden on consumer incomes.

The Pietermaritzburg Agency for Community Social Action (Pacsa) released its food price barometer on Wednesday‚ which showed that a basket of 32 basic foods in the shopping trolleys of poor working-class households in the city had increased from R1‚509 to R1‚640 last month - an 8.7% year-on-year increase.

"As economic pressures increase on households and certain foods became unaffordable‚ households substitute those foods with cheaper products‚" said Pacsa director Mervyn Abrahams.

Some of the protests that were "mushrooming" across SA‚ and wage strikes‚ indicated workers' frustration at no longer being able to afford to feed their families on low wages. "Unless wages can increase and food prices and the costs of electricity‚ transport and household debt come down‚ the working class poor will fast approach its tipping point and we will enter a new age of hunger riots and food protests‚" Abrahams warned.

Statistics SA data showed seasonally adjusted retail trade sales rose 0.9% in the three months ended August‚ compared with the previous three months. Sales were up 1.2%‚ compared with the period last year.

Source: BDpro via I-Net Bridge