Growth in retail sales plummets

2013-11-14 08:50

Economic conditions remain challenging as September retail sales figures released by Stats SA showed annual growth fell sharply to its lowest level since January 2010.

Growth in retail sales decreased to 0.2% in September from 3.2% in August, while most analysts were expecting a 2.5% growth.

Positive contributors to the 0.2% increase were textiles, clothing, footwear and leather goods retailers (contributing 1.1 %) and retailers in hardware, paint and glass (contributing 0.3%).

However, analysis from Nedbank suggested the recent unexpected improvement in employment in the third quarter was encouraging and should help boost consumer confidence.

Stats SA announced last month that in the three months to September the net number of employed people had increased.

“Our baseline view for some time has been that weak underlying economic growth would undermine employment creation and growth in household spending. However, the recently released Quarterly Labour Force Survey showed a surprising 308 000 increase in total employment over quarter three, and we think this could offer some support for household spending over the coming quarter,” Absa said.

But according to analysis from Nedbank, consumer confidence would not be sustained as general economic conditions remained challenging.

“High inflation, particularly higher food, fuel and administered prices will continue to impact negatively on household earnings, and lenders will remain cautious of extending unsecured credit on credit quality and regulatory considerations. Therefore, we are unlikely to see much improvement in consumer spending in the final quarter,” said an analyst at Nedbank.

Next week, the Reserve Bank will have its last monetary policy committee meeting of the year, where it is expected that interest rates will remain unchanged.

The Reserve Bank has kept the repo rate (the rate at which it lends money to commercial banks) at 5% and the prime rate, therefore, has been left unchanged at 8.5%.

“We anticipate that the Reserve Bank will continue to strike a balance between weak growth and rising inflation by maintaining its accommodative monetary policy stance well into 2014,” said Nedbank.

Gross domestic product (GDP) is also expected to have slowed down in the third quarter. Those numbers are expected later this month.

“Third-quarter growth appears likely to have eased to under 1.5% quarter on quarter annualised after the 3% improvement in the second quarter,” said Nedbank.

The bank said it expected GDP growth for 2013 to be 1.9%.

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