Signs point to better Christmas trading

This is according to Stephen Mallaby, managing director of retail software company UltiSales Retail Software, a subsidiary of JSE-listed UCS Group.

Mallaby on Wednesday said that while a "contagion knock-on effect from troubled European Union countries is an added worry," retail sales are expected to outstrip 2009 figures.

"The Monetary Policy Committee reduced interest rates by a further 0.5 points last month, taking our interest rates to their lowest level in the last 30 years.

"This has improved the sentiment of consumers, who have more access to money and are more prepared to spend, including on credit," he said.

Results from the latest Bureau for Economic Research (BER)/Ernst & Young Festive Season Retail Trends survey reveal that after a two-year hiatus, consumer spending should be relatively strong over the period leading up to Christmas.

Higher sales volumes

The survey showed that a net majority of 15% of the survey respondents reported higher fourth quarter sales volumes compared with the final quarter of 2009, adding that selling price increases will be lower than during 2009.

Speaking to on-line publication BizCommunity, Derek Engelbrecht, retail and consumer products sector leader at Ernst & Young, said that based on historical correlations, this suggests that festive season retail sales volumes should increase by more than 5% compared with the weak 2009 holiday trading period.

The improved sales projections are in line with the actual retail sales numbers that have already been released for the year to September 2010.

After declining by 3.4% during 2009, according to Stats SA, real retail sales have rebounded by just more than 4% in the first nine months of 2010.

Still some clouds

However, despite this seemingly good news for retailers, there are some clouds hovering on the horizon, according to UltiSales.

"Greece has had to take multi-billion euro bailouts from EU countries, and is expected to battle to contain debt during the next few years and Ireland has also had little choice but to accept EU help to avoid a breakdown in their financial system," it said.

"At the peak of the financial crisis, the UK and the US were in a position to provide guarantees worth trillions of dollars to support their banks, even though the real cost turned out to be much lower as confidence was speedily returned.

But matters have now become more troublesome, and unemployment and growth remain a problem in the US," UltiSales added.

The retail software company said that the Irish meltdown, coming so soon after the Greek financial debacle, has sent shivers up the spines of other EU countries, with pundits suggesting that countries like Portugal and Spain are also looking vulnerable due to onerous debt burdens.

"If things spread in the EU, business sentiment could be badly battered.

This could have a negative effect on global economic recovery and might even have a knock-on affect in South Africa.

Economists are increasingly predicting that the euro, as a currency, will cease to exist within the next 5-10 years," concluded UltiSales.