Red flags for retail in South Africa
Statistics South Africa (Stats SA) says retail trade sales decreased by 0.5% year-on-year (YoY) in February 2023.
Stats SA gathers information from the retail trade industry via a monthly survey, which is based on a sample from Stats SA’s 2022 business sampling frame (BSF) that contains businesses registered for value-added tax (VAT).
The statistics agency said that the retail trade sales survey is used to compile an estimate of the GDP and its components, which are used to formulate economic policy.
In addition, the statistics can be used to compare business and industry performance.
Stats SA said that General dealers (declining 1.5% and contributing -0.7 of a percentage point); and Retailers in hardware, paint and glass (-7.7% and contributing -0.6 of a percentage point) were the largest contributors to the 0.5% decrease in February 2023.
The YoY percentage change in retail trade sales by type of retailer can be seen below:
On a month-to-month basis, seasonally adjusted retail trade sales declined by 0.1% in February 2023 compared to January 2023, following a 1.5% MoM increase in January 2023.
Moreover, for the three months that ended February 2023, retail trade sales declined by 0.6% compared to the same period a year prior.
The largest negative contributors to the decrease were again Retailers in hardware, paint and glass (-6.1% and contributing -0,.5 of a percentage point); and General dealers (-0.6% and contributing -0.3 of a percentage point).
Whereas retailers in textiles, clothing, footwear and leather goods (growing 3.5% and contributing 0.7 of a percentage point) were the biggest positive contributors.
Retail trade sales for the three months that ended February 2023 are below:
However, Stats SA did have some positive news for the retail sector.
Seasonally adjusted retail trade sales rose 1.2% in the three months ending in February 2023 compared to the previous three months.
Stats SA said that the largest contributors to the increase were retailers in textiles, clothing, footwear and leather goods (4.0% and contributing 0.7 of a percentage point); and all ‘other’ retailers (2.8% and contributing 0.3 of a percentage point).
Below is the seasonally adjusted retail trade sales for the latest three months:
Outlook
Despite the 1.2% increase in the three months ending in February 2023, FNB said that the data suggests the country probably slipped into a mild recession in Q1 2023.
FNB said that the increase in production and operational costs due to load shedding would affect corporate margins, employment and wage gains.
Although non-labour income remains resilient, the outlook is largely negative, with weaker corporate earnings prospects and their impact on dividend payouts.
Moreover, the elevated inflation, debt servicing costs and low consumer confidence will likely result in muted household consumption expenditure in the coming months.
However, the bank said that the credit market remains incredibly active, partially supporting household consumption.
That being said, FNB warned that the risk of credit defaults might increase due to slower income growth and the accumulation of more expensive lines of credit, which could further strain household finances.
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