Big boost for retail in South Africa
Business confidence among retailers in South Africa saw a boost in the third quarter (Q3) of 2024.
This is according to the Bureau for Economic Research’s (BER’s) recently published Retail Survey, which was conducted between 7-26 August 2024.
After aligning with the long-term average in Q2, the survey outcomes showed that business confidence among retailers increased by six percentage points (% pts) to 45% in Q3 2024.
Helanya Fourie, senior economist at the BER, said that the rise was contributed to by “consumers’ real disposable income boosted by inflation at a three-year low… the absence of load shedding, the market-friendly election outcome [boosting sentiment], and expectations of an interest rate cutting cycle.”
Retail trade sales (real terms) increased by 2.0% y/y at the start of Q3 (July), versus June’s 4.1% y/y lift.
Retail sales increased overall, with five of seven categories rising year-on-year; however, hardware paint and glass sales fell by 6.7%, and the “all other retailers” category contracted by 2.7%, together detracting 0.8 percentage points from the headline figure.
The general dealers’ category, accounting for over 40% of the index, drove July’s 2.0% y/y increase, with a 4.4% rise contributing 1.8 percentage points.
Investec economist Lara Hodes outlined that consumer confidence improved further in Q3 (to the highest level since the first half of 2019).
Hodes said that falling rates of inflation have been key to lifting real incomes and “constrained consumers, especially the heavily indebted, will benefit from the start of the SARB’s monetary easing cycle.”
Looking at some of the outcomes of the BER survey, retailers of non-durable goods (food, beverages, groceries, cosmetics, and pharmaceuticals) were the least optimistic, “suggesting that non-durable goods retail sales grew slower during [Q3] than the relatively robust growth recorded in [Q2],” said the BER.
Retailers of semi-durable goods (clothing, textiles and footwear) saw business conditions improve to above-average levels in Q3.
“However, as in the same quarter last year, these retailers seem to be pushing volumes to sell excess stock,” explained the BER, adding that although expectations about sales volumes in the next quarter have improved, “optimism remains constrained.”
Durable goods retailers boosted overall retail confidence in the BER survey.
Confidence among furniture retailers stood out, rising from 38% to 64% and reaching its highest level in three years.
Wholesaler confidence fell marginally to 51% in the third quarter but remained above the long-term average, with more than half of wholesalers satisfied with prevailing business conditions.
Confidence among new vehicle dealers rose by 17% pts to 27% and their outlook on business conditions and sales volumes improved significantly in the third quarter.
“The BER’s motor trade survey results suggest that the worst may have passed for the sector, with consumer inflation at 4.4% in August, a stronger rand, fuel price reductions and the start of an interest rate-cutting cycle,” added the BER.
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