Retail rebound

2008-04-17 00:00

THE South African retail sector rebounded somewhat in February 2008 to record real year-on-year growth of 2,5%, illustrating a certain level of consumer resilience prior to last week’s interest rate hike.

Christo Luüs, an economist at Quantec, told The Witness that this level of retail growth is in line with expectations that national real GDP growth will hover around the 2,5 to three percent mark this year.

Retail growth was propped up by textiles, clothing and footwear retailers and general dealers.

The growth was fairly higher than economists’ forecasts, which came in at -0,5% to 0,5%.

The figure is slightly surprising given the financial constraints experienced by consumers in the wake of higher interest rates and higher inflation. However, Luüs noted that “Two-and-a-half percent is more positive, but not great”.

He added that the latest figure confirms the fact that South Africa’s economy no longer faces a problem with regard to excessive demand.

Furthermore, retailers in household furniture, appliances and equipment continued to experience negative growth in trade sales.

Retail sales are key indicators of consumption expenditure by households, which in turn makes up more than 60% of GDP.

Luüs does not expect the retail sector to perform better over the next eight to 12 months. “Growth in volumes is not expected to be high due to high price increases, particularly with regard to food prices.”

Nedbank’s Group Economic Unit also noted that the Retailers’ Liaison Committee (RLC) reported slower year-on-year growth of 4,5% in February, following a 5,3% rise in the previous month.

“Their breakdown showed that growth moderated in all major categories. Higher household debt, inflation and tighter access to credit should continue to weigh on consumers’ purchasing power and keep retail sales under pressure,” said the Unit.

A study by FNB Home Loans released yesterday reveals that 75% of respondents are currently feeling the financial pinch.

According to Lynette Nicholson, Head of Research at FNB Home Loans, older and younger consumers are coping with the current financial constraints in different ways.

“The ‘older’ generation are consolidating their debt into their home loans and the ‘younger’ generation are borrowing additional money from family and friends.”

With retail trade sales being hit fairly hard in recent months, it is hardly surprising that consumers are cutting spending on entertainment, movies, eating out and luxury food and grocery items.

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