Consumer spending in South Africa appears to be waning slightly ahead of the festive shopping season, as higher interest rates bite into disposable cash.
Data from Statistics South Africa (Stats SA) yesterday showed that retail trade sales unexpectedly fell by 0.6% in September compared to the same month a year ago.
This followed an upwards revised 2.1% increase in August, also defying market forecasts of a 1% increase.
Stats SA’s deputy director for distributive trade statistics, Raquel Floris, said sales fell primarily for food, beverages and tobacco; hardware, paint and glass; and pharmaceuticals and medical goods, cosmetics and toiletries.
“Hardware, paint and glass recorded its fifth consecutive quarter of year-on-year decline, decreasing by 8.0% in September,” Floris said.
“Retailers in food and beverages registered a similar result, decreasing by 8.1% in the same month. On the upside, general dealers and retailers specialising in textile and clothing showed growth rates in September,” she said.
The retail print for September concludes the results for the third quarter of 2022, showing that sales declined by 1.9% in the three months.
This represents a second consecutive quarter of decline following a 1.1% decrease in the three months to June.
Persistent, heightened load shedding in September would have weighed on retailers’ ability to operate optimally while also weighing heavily on the confidence of consumers, who are grappling with rising debt costs and declining real incomes.
Interest rates have nearly doubled in the current cycle with a further large 100 basis points hike likely next week, as inflation remains notably above the high point of the SA Reserve Bank’s inflationary targeting band of 3-6% driven by elevated energy and food prices.
FNB senior economist Siphamandla Mkhwanazi said retail sales volumes rounded off the third quarter on a sour note, and will, for a successive quarter, detract from the third quarter GDP growth.
Mkhwanazi said households have been accumulating unsecured credit more rapidly in the past few months, following a pandemic-related deleveraging trend.
“This is consistent with depleting household savings, subdued real income growth and generally a higher costs of living, and may be indicative of a household budget squeeze.
“As such, we continue to expect household consumption expenditure growth to average 2.9% this year from 5.6% last year, as consumer headwinds persist.
“In the near-term retail sales could be temporarily supported by Black Friday and festive season-related spending,” Mkhwanazi said.
On a monthly basis, Stats SA said retail trade rose by just 0.1% in September, following a downwards revised 1.3% decrease in the previous month.
Nedbank economist Crystal Huntley was, however, optimistic about an uptick in spending in the coming festive season.
Huntley said retail trade should pick up relative to September in the months to come, as consumers take advantage of Black Friday specials and maintain higher levels of spending during the festive season.
“Volumes are, however, unlikely to be significantly higher than in the same period in 2021 as the challenges of higher prices, dismal labour markets, and tighter financial conditions squeeze disposable incomes and weigh on consumer sentiment,” Huntley said.
“These conditions will continue to dampen retail sales in the new year,” she said.
BUSINESS REPORT