Rand picks up after surprise growth in retail sales
South Africa’s retail sales rose by 0.8% year-on-year in March, Stats SA reported on Wednesday, beating market expectations of a contraction, after falling by 1.6% in February.
This marks the second surprise in data out of the stats agency, after the release of positive mining data last week, which also surprised many economists, putting the country on track to avoid slipping into a technical recession this year.
Measured in real terms (constant 2012 prices), retail trade sales increased by 0.8% year-on-year in March 2017, Stats SA said, noting that the highest annual growth rates were recorded for retailers in:
- food, beverages and tobacco in specialised stores (14.8%);
- household furniture, appliances and equipment (8.2%); and
- pharmaceuticals and medical goods, cosmetics and toiletries (7.2%).
Analysts polled by Reuters had forecast a 0.7% year-on-year contraction in March.
The positive data, coupled with tensions around the Trump presidency’s relationship with Russia knocking the US dollar, led to a surprising rally in the rand, which saw it close at R13.05 to the greenback on Tuesday.
The rally was reversed on the anticipation of negative sales data, pulling back to R13.15 to the dollar – but has now eased again to R13.10 to the dollar by 14h00.
The next resistance level of the rand is at the R13.00 mark, though economists do not expect the currency to break that level, as political uncertainty still rocks the South African market.
Local economists have said the rand’s relative strength following the axing of former finance minister Pravin Gordhan in March, and the subsequent ratings downgrades, has been quite surprising.
Possible explanations are that the downgrades to junk status have been factored into the economy for some time; global economic conditions are balancing out local uncertainty; or foreign investors and traders simply do not fully understand the local risks.
Read: Surprise rand rally cut short by expected retail slump
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