Despite challenging economic conditions, retail sales growth for July 2017 was the highest recorded for that month since 2015.
This is according to the Mastercard SpendingPulse report, a macroeconomic report tracking retail sales, which launched in South Africa for the first time on Wednesday.
Nominal (not adjusting for price changes/inflation) July retail sales grew 7.2% versus the same month last year, marking the 55th consecutive month of positive growth.
Volume retail sales – which removes the effects of inflation – for July also saw a positive increase of 2.3% year-over-year, indicating that consumer spending remains resilient, despite higher consumer prices.
“The continued growth in retail sales in July is encouraging, and points to a slight improvement in the consumer economy as the country emerges from a technical recession,” said Sarah Quinlan, senior vice president and head of market insights for Mastercard.
“South Africa’s consumer has shown resilience in the face of weak wage growth and high unemployment, reported at 27.7% in the second quarter.”
“While consumer spending is showing signs of recovery, South Africans still face a challenging macro-economic environment. The economic health of the consumer warrants close monitoring as the economy looks to regain its footing,” said Quinlan.
Pharmaceutical, medical goods, cosmetic and toiletry sales have outperformed other retail segments over the past 12 months, with sales volumes rising 3.4%.
However, momentum has weakened since the start of the year, with sales volume in July rising 2% year-on-year, slightly slower than retail as a whole.
Price inflation for products and services in the health sector accelerated from 5.3% year-on-year for July 2016 to seven percent for July 2017.
On the opposite end of the spectrum, general dealer sales have underperformed, with sales volumes falling 0.3% year-on-year in July, and the value of retail sales down 1.1 percent over the past 12 months.
“Consumers spent less and consumed less, partly because inflation has eroded their spending power. South Africa’s CPI increased 4.6%, driven largely by a 6.8%rise in food prices,” said Quinlan.
Speaking to BusinessTech on the sidelines of the results presentation, Quinlan explained that more than government or big business, getting consumers to buy and sell to one another is what will drive the South African economy forward.
This is why, despite the cabinet reshuffle and firing of Pravin Gordhan earlier this year, its important that consumers have begun spending again, she said.
“(Local politics) takes a big effect – but the worst thing that can happen in any economy is uncertainty,” she said.
“At least there is now understanding about what the circumstances are surrounding Zuma, Gordhan, and his cabinet – and South Africans can plan accordingly.”
She indicated that macro-level economics, like the recent Chinese ban of imports saw the South African economy take a larger knock than the reshuffle – although the cabinet reshuffle did have an effect because of the uncertainty it created.
She explained that a similar situation recently occurred in the USA where the dollar fell over concerns of the jobs report and Federal Reserve money policies.
“The US rebounded as soon as it had confirmation of the report and the policies – and the same will happen in South Africa,” she said.