According to Derek Engelbrecht‚ retail and consumer products sector leader at Ernst & Young‚ the results indicate that sales volumes of non-durable goods like food‚ beverages and cosmetics were particularly disappointing‚ while sales growth in the semi-durable goods retail trade of clothing‚ footwear‚ toys and CDs also waned.
Official retail sales data released by Statistics South Africa (Stats SA) shows that the growth in total retail sales volumes had already slumped from 5.3% year-on-year (y/y) during the third quarter of last year to 2.4% y/y in the fourth quarter of last year and reduced further to only 1.9% y/y in January this year.
"Volume growth remained weak during the remainder of the first quarter‚ with non-durable goods sales in particular now under severe downward pressure‚" the Ernst & Young/BER survey showed.
According to Stats SA‚ the growth in retail sales volumes of specialised food‚ beverage and tobacco stores and retailers in cosmetics‚ toiletries and pharmaceutical products slowed from 4.4% y/y in the third quarter of last year to 2.6% y/y in the fourth quarter of last year‚ while sales volumes contracted by 3.3% y/y in January 2013.
"The slowdown in non-durable goods sales growth since mid-2012 can in all likelihood be ascribed to the lack-lustre pace of job creation during the second half of 2012 and soaring food‚ fuel and electricity prices‚" Engelbrecht said.
Higher prices for essentials such as food‚ transport and electricity put added strain on the purchasing power of households‚ particularly among the lower income groups that spend a large proportion of their monthly disposal income on non-durable goods. A slowdown in unsecured lending has in all likelihood now also started to weigh on the finances of lower- and middle-income consumers‚ providing less stimulus to the retail sector.
On a more positive note‚ the results from the Ernst & Young/BER survey suggest that the rate of increase in non-durable goods selling prices and input costs slowed during the first quarter of 2013.
"Unfortunately‚ this is likely only a temporary respite for consumers‚ as a weaker exchange rate‚ substantially higher transport costs and rapidly rising grain‚ meat and vegetable prices are expected to push food price increases above the 10% mark by mid 2013. Apart from price hikes‚ factors such as muted job creation and slower growth in social grants expenditure will keep a firm lid on the growth in non-durable goods sales volumes during the remainder of 2013‚" Engelbrecht said.
The growth in semi-durable goods sales volumes remained significantly stronger compared with that of non-durable goods during the first quarter of 2013‚ but retailers were nevertheless disappointed by the fact that volume growth slowed relative to the 2012 festive season.
Engelbrecht noted that the vast majority of semi-durable goods retailers reported a deterioration in trading conditions and lower overall profitability levels. Fuelled by the sharp depreciation in the rand exchange rate over the last year‚ import prices of clothing‚ footwear‚ toys and CDs rose‚ putting downward pressure on the profit margins of semi-durable goods retailers.
"This happened as weaker demand prevented retailers from hiking their selling prices enough to pass on their higher input costs to consumers‚" he said.
Following relatively disappointing sales growth over the festive season‚ the results from the survey suggest that durable goods sales volumes including hardware‚ furniture‚ household appliances and electronic goods recovered somewhat during the first quarter of this year.
In all‚ the percentage of retailers reporting that they are satisfied with prevailing business conditions deteriorated from 54% during the fourth quarter of last year to 50% in the first quarter of this year‚ mainly due to slower sales growth and lower profitability levels among non-durable and semi-durable goods retailers.
Looking ahead‚ the growth in retail sales volumes is likely to remain subdued over the next six months‚ as both real income growth and credit extension is expected to slow on weak global economic growth and poor job creation prospects domestically.
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