Slowdown in retail sales signals growth drop

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Growth in retail sales slowed further from 2.9% year on year in March to 1.5% year on year in April, its slowest pace of growth in almost two years.

Sales shrank in April compared with the previous month, according to Statistics SA data.

The latest retail sales data, released on Wednesday, also suggested low economic growth at the start of the second quarter.

While the weak retail sales would add to the pessimism engulfing SA’s economy after a contraction in the first quarter, a stronger performance in other sectors such as manufacturing suggested the economy had strengthened slightly going into the second quarter, Capital Economics economist John Ashbourne said.

The London-based economic research company projects economic growth at 0.5% for 2016.

The main risk to economic growth would be if mine workers, locked in wage negotiations, went on strike, Ashbourne warned.

The 52c/l increase in the petrol price in June could dull retail sales growth just as the 88c/l price hike in April affected sales, said Investec chief economist Annabel Bishop.

Pharmaceuticals and medical goods, cosmetics and toiletries; textiles, clothing, footwear and leather goods; and hardware, paint and glass retailers supported the 1.5% increase in sales, suggesting consumers were spending on cheaper rather than expensive goods.

General dealer sales slipped, marking the first growth contraction since January 2015 and possibly highlighting the growing pressures on nondurable goods purchases by consumers in an "increasingly uncomfortable" inflation environment, said BNP Paribas Securities economist Jeff Schultz.

The inflation rate has been outside the 3%-6% target range since January 2016, mainly due to rising food prices.

Increasing food prices, softening disposable incomes, rising interest rates and high unemployment were among factors behind the expectation for a strong slowdown in household spending growth to 0.7% in 2016 from 1.7% in 2015, Schultz said.

The retail sales figures were released a day after Reserve Bank data showed that household spending contracted by 1.3% in the first quarter of 2016 following a 2.1% increase in the previous quarter.