Positive retail sales suggest a rebound in GDP

Johannesburg – Positive retail sales data for June, coupled with mining and manufacturing data could reflect well on GDP, said an analyst.

According to Statistics South Africa (Stats SA), retail sales increased 2.9% year-on-year in June 2017, the strongest performance recorded since November 2016, said Jason Muscat, FNB senior economic analyst. The growth is also higher than the 1.6% annual growth reported in May 2017.

GDP could rebound by as much as 2.5% for the second quarter of 2017, but remain at 0.5% year-on-year, said Muscat. “Overall, the outlook for household consumption remains muted given just how weak consumer confidence is, although a shallow rate cutting cycle should provide modest relief until higher taxes are likely to take hold after the February budget,” he explained.

Investec economist Kamilla Kaplan is also of the view that the retail sales data will contribute positively towards GDP.

“Consumers’ ability to spend has been affected by declining real income growth, weak credit extension and high unemployment,” she said. The lower consumer confidence is also influencing willingness of consumers to spend, she explained.

The data showed that sales grew 0.2% from the previous month.  

The highest growth rates were reported for food, beverages and tobacco in specialised stores which was up 12.4%. This was followed by household furniture, appliances and equipment at 8.3% and “other” retailers with a growth of 5.8%.

The main contributors to the 2.9% growth over the past year include general dealers which grew 2.5% over the past year, and food, beverage and tobacco specialized stores.

Clothing retailers are also showing a “modest relief”, Muscat said, with sales up 3.9% over the past year. Muscat said consumption of durable goods is expected to remain pressured, despite the rate cut.

The data also showed that for the first time since May 2014, pharmaceutical goods sales contracted by -1.9% over the past year. “This was due to a much higher base in June 2016 when sales rallied 10.4% year-on-year,” he explained.

Hardware sales are also still under pressure, down -7.1% for the year. However the sector expanded 2.1% for the quarter and 2.2% for the year.

Retail trade sales increased by 2.2% in the second quarter of 2017, compared to the same period last year. The main contributors to this growth include general dealers which increased sales by 2.6% and food, beverages and tobacco in specialized stores which grew 12.8%. 

Investec expects household consumption expenditure to remain subdued, with growth projected at 1% compared to 0.8% reported in 2016.

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