Following a short-lived boost, retail sales may slow down in the first half of 2017 because of increased consumer pressures in the coming months, say analysts.
Annual retail sales were up by 3.8% in November 2016, according to data released by Statistics South Africa (Stats SA) on Wednesday.
Black Friday helped boost sales growth by 3.5% from October 2016, explained Jason Muscat, FNB senior economic analyst. This contrasts from the -0.6% decline in sales from September to October.
The highest annual growths were recorded for retailers in hardware, paint and glass (5.4%); pharmaceuticals and medical goods and cosmetics and toiletries (4.9%); and general dealers (4.7%).
General dealers were the main contributor to the 3.8% sales growth, with two percentage points.
However clothing sales disappointed, by increasing 1.9% over the past year. This is mainly owing to stricter lending criteria and negative credit extension growth, explained Muscat. Furniture, appliances and equipment is also the only sector that contracted, with annual sales growth at -0.8%.
“We expect that the revival in the month will be short-lived,” said Muscat.
December sales are expected to disappoint due to the pre-December buying brought on by Black Friday. The 6.8% inflation recorded for December also may reflect subdued consumer spending.
“While we anticipate slightly higher household consumption growth levels in 2017, there is unlikely to be any interest rate relief for consumers given the sticky inflation numbers,” he said.
In a statement, chief economist at Stanlib, Kevin Lings, said that the combination of the higher inflation rate, weaker consumer confidence, higher utility prices, higher unemployment, fuel price hikes, higher interest rates, and possible tax hikes in February may add pressure to consumer spending in coming months.
He added that the latest annual growth rate was above market expectations for a decline of 0.4%. Inflation was noticeably higher in 2016, the reserve bank continued to hike rates in the early part of the year and banks were stricter in granting credit.
“The net result is that the consumer has less discretionary income available for general retail activity,” he said.
Consumer confidence versus consumer spending