Cape Town - Sales prompted by Black Friday and Cyber Monday have likely distorted the economic transaction figures for the full month of November, disguising indications that weakness in the economy remains, according to Mike Schüssler, chief economist at Economists dotcoza.
He was commenting on the latest BankservAfrica Economic Transaction Index (Beti) released on Wednesday. It shows sales on Black Friday and Cyber Monday helped to improve economic transactions in SA slightly in November.
"I want to caution about November's figures as there is a change in seasonality due to Black Friday having started to play a big role. Retailers are buying a lot more from wholesalers in preparation for Black Friday, for instance. In October consumers might also rather hold out for Black Friday and then Black Friday sales also take away from the mad shopping rush in December," Schüssler told Fin24.
“Sales during Black Friday and Cyber Monday enticed consumers to spend more, leading to a Beti increase, which is seeing November become a stronger month relative to others. It spurred the shopping season to arrive earlier the last two years.”
The Beti for November was 0.3% higher than in October, but thanks to Black Friday and Cyber Monday sales it was 1.6% better than a year ago. On a quarterly basis, the Beti declined by -1.3%, indicating to Schüssler that consumers and businesses are still cautious when it comes to spending.
"Transaction sizes have declined in nominal terms and reflect an economy where confidence is lacking," said Schüssler. “Early debit order volumes are growing quickly, which is perhaps another sign of underlying stress in the economy. One could say the SA economy is refusing to die, but it is also refusing to grow."
For the last two decades the trend was that the last three months of the year would have retail sales equal to the first nine months and December retail sales would be more than half of the sales over those last three months, explained Schüssler.
Now consumers are not waiting for Christmas to buy specials, because they get these on Black Friday already.
"What we are picking up is that November is getting stronger all the time. It is not just regarding retail. Remember the Beti picks up wholesale and manufacturing transactions too. Manufacturers likely produced earlier and wholesalers bought earlier in view of Black Friday," said Schüssler.
"So, it will slow down quicker in December again, causing me to feel that December will be a lot tougher. The 'Christmas season' is now starting in the last week of November rather than the first week of December like it used you. The day before Christmas is also not any more the mad shopping rush day. I think the Beti is picking up this changing trend and we could have a weaker December."
On Wednesday Jason Muscat, a senior economic analyst at FNB, said October retail trade sales softened to 3.2% y/y from September’s upwardly revised 5.7%.
"We ascribe the slower growth rate to consumers having deferred some purchases in anticipation of large Black Friday savings in November. General dealers (-0.3% y/y) and hardware retailers (-0.9% y/y) were the only two categories to contract on an annual basis. Food and beverage stores, pharmaceutical, clothing and furniture stores registered gains of 0.8% y/y, 5.7%, 5.5% and 5.4% respectively," said Muscat.
The “other” category, which includes book stores, jewellery outlets, sporting and second hand goods retailers, continues to show double digit growth.
"We expect a good recovery in November and December on the back of Black Friday sales and Christmas buying, but would not rule out a quarter-on-quarter contraction in the sector in the first quarter of 2018 due to the distortion of Black Friday volumes," he said.
"Overall, the benign inflation backdrop, steady interest rates and above inflationary wage increases have been a boost for retail sales, but sales growth is likely to be curbed somewhat in 2018 due to the impact of tax increases in the February budget."
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