Good news for retail in South Africa
South African retail sales have seen another jump, exceeding expectations and sparking hope for the medium to long term in the sector.
According to StatsSA, retail trade sales increased by 4.1% year-on-year (y/y) in June 2024 following a 1.1% y/y rise in May.
This outcome was well above the Bloomberg consensus expectation of 1.0% y/y.
“This outcome means that volume sales rebounded from -0.3 q/q in 1Q, to 1.5% q/q in 2Q, implying that the retail industry will contribute positively to 2Q24 GDP growth,” said FNB Senior Economist Siphamandla Mkhwanazi.
Chief Economist at Investec Annabel Bishop said that “some relief post-election also likely spurred spending on a peaceful, democratic election, and there was no shift to the left in the formation of the multi-coalition (GNU) government post-election.”
Mkhwanazi echoed and furthered this, saying that this boost aligns with the cessation of load-shedding since March, a significant petrol price reduction in June, and improved sentiment following the election.
The large leap in sales was greatly boosted by a 7.3% y/y increase in general dealers’ sales and a 6.1% y/y rise in textiles, clothing, and footwear sales – the two most heavily weighted categories.
The only other category that recorded annual growth was household appliances, furniture and equipment, at a lift of 1.8% y/y, while sales of pharmaceutical, medical and cosmetic products were flat on the year.
Sales of hardware, paint and glass fell -1.1% y/y. Specialised stores selling food beverages and tobacco also reported a decline in sales of -1.5% y/y.
Meanwhile, shopping activity in pharmaceutical shops was unchanged compared to the same period last year.
Retail trade sales increased by 2.0% in the second quarter of 2024 compared with the second quarter of 2023. The largest contributor to this increase was general dealers (3.2% and contributing 1.4 percentage points).
Looking at seasonally adjusted statistics, retail trade sales increased by 1.6% in June 2024 compared with May 2024, following month-on-month changes of -0.2% in May 2024 and 0.5% in April 2024.
However, it still “fell by -0.1% m/m in unadjusted terms, showing the outcome of 4.1% y/y was boosted by particularly low statistical base effects,” explained Bishop.
Seasonally adjusted retail trade sales increased by 1,5% in the second quarter of 2024 compared with Q1.
The largest contributors to this increase were once again retailers in textiles, clothing, footwear and leather goods (3,2% and contributing 0,6 of a percentage point) and general dealers (1,1% and contributing 0,5 of a percentage point).
Analysis
Mkhwanazi said that retail sales are up by 0.9% year-to-date compared to the same period last year.
“Data suggests that these gains have all come from the last three months – which coincides with load-shedding cessation since March, a substantial petrol price cut in June, as well as the post-election improvement in sentiment,” said Mkhwanazi.
The economist added that while June’s figures are encouraging, the broader consumer environment remains challenging due to high living costs, unemployment, and tight credit conditions.
“The upcoming two-pot pension system is expected to have a limited impact on consumer spending, given concerns about rising debt distress,” said Mkhwanazi.
“However, there is potential for an improved consumer backdrop in the medium term as inflation eases and interest rates gradually decline,” he added.
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