SA’s April retail trade sales ‘surprisingly’ good, following lower market expectations

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South African consumers will continue to face financial pressure in coming months.
South African consumers will continue to face financial pressure in coming months.
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South Africa’s retail trade sales jumped by 3.4% year-on-year for April, beating market expectations.

On Wednesday, Statistics South Africa said the biggest growth came from household furniture, appliance and equipment retailers - at 6.8%. Textiles, clothing, footwear and leather goods retailers saw a 6.4% sales increase, while general dealers had a 5.4% growth.

In a note, Investec economist Lara Hodes said Bloomberg expected 1.7% year-on-year growth for April.

That said, the hardware, paint and glass category contracted by -8.3% as Covid-19-fuelled demand for home improvement products declined.

"...[T]his category of the market has seen a marked decline as many companies have mandated a return to the office or a hybrid working policy, decreasing demand for DIY and home enhancement-related products," said Hodes.

She added that growth in textiles, clothing, footwear and leather goods was aided by people returning to work and spending more time outside their homes, as restrictions eased.

"When measured on a month-on-month, seasonally adjusted basis, retail sales declined by -0.2%. Many households are still financially stretched in the current economic environment," said Hodes.

She explained that high unemployment, a "sluggish" job market, and soaring food prices continue to put disposable incomes under pressure. 

The pressure is not likely to ease any time soon, with Hodes pointing out that the South African Reserve bank may raise interest rates by another 50 basis points in July.

In a note, Absa’s corporate and investment banking division said: "Against the backdrop of extreme floods in KwaZulu-Natal, intense load shedding, and a delay in the payment of the R350 Social Relief of Distress grant, retail sales held up surprisingly well."

The division added that the 3.4% growth was better than its 1.4% forecast and Thomson Reuters’ 1.6% consensus.

Despite the good news, Absa said going forward, expenditure will remain low due to rising inflation, low economic growth, increasing financing costs and low business and consumer sentiment.

"However, a few mitigating factors are there, in our view … accumulated household savings in South Africa are likely to provide some support for consumption in the near term," said Absa. 

But the support will not be as much as that in wealthier countries, which saw an increase in household savings rates during the Covid-19 pandemic.

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