Consumer spending slumps

2009-01-21 00:00

South Africa’s retail sector experienced a depressing pre-festive period as sales in real terms plunged four percent year on year in November 2008, the seventh consecutive month of declining retail sales.

Statistics South Africa’s data revealed yesterday that the retail sector is under immense strain amid tougher economic conditions.

The sector was unable to rebound in November, despite the fact that the final two months of the year usually deliver firm retail sales.

Widespread consumer spending cuts appear to have firmly taken hold as the South African consumer battles to cope with high interest rates, an erosion of purchasing power and retrenchments.

Standard Bank senior economist Dr Johan Botha said the growth rate over the first 11 months of 2008 dropped to 2,4%, compared to a growth rate of 5,8% in the corresponding period in 2007.

“The last quarter of 2008 is likely to record weak sales growth compared with previous years, due to the unfavourable economic environment. Consumer spending is unlikely to improve in the months ahead due to the deteriorating economic climate and a lack of job security, which will put further strain on consumer confidence,” added Nedbank’s Group Economic Unit.

Economists believe the latest figures support the case for an interest rate cut. The Reserve Bank’s Monetary Policy Committee (MPC) meets on February 4 and 5 to decide on the matter.

Meanwhile, anecdotal information from several KZN malls suggest that although foot-count levels remained very high, consumer spending moderated during December 2008.

However, most local centres appear to be pleased with the trading levels experienced, particularly given the fact that they operated in a tough trading environment.

The week leading up to Christmas Eve seems to have attracted the most number of visitors to local malls.

kavith@witness.co.za

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