The Bureau for Economic Research (BER) reports that sentiment for retailers in South Africa has reached a new low since the 2009 global financial crisis.<\/p>\n
From its latest Retail Survey for the first quarter of 2023, the BER showed that confidence dropped from 42% to 34% in the first quarter of 2023, which brings retail confidence 6% points below the long-term average.<\/p>\n
This suggests that the retail sector is under pressure and is currently facing weak consumer demand.<\/p>\n
As measured by an index, business conditions are also low for retailers, following a similar downward trend from -23 to -41.<\/p>\n
“While it is common for the first quarter of a year to have weak sales compared to the festive season, retailers expect lower sales this quarter than in the first quarter of last year,” said the BER.<\/p>\n
“In fact, according to Stats SA, retail sales in January were -0.8% lower than at the start of 2022. The BER’s 2023 Q1 survey results indicate a continuation of the contraction in durable- and non-durable goods sales volumes that started in the fourth quarter of 2022.”<\/p>\n
“However, semi-durable goods seem to hold firm on the back of a recovery in clothing and footwear sales.”<\/p>\n
The group said this indicates that consumers are pinched by high inflation and an elevated interest rate affecting non-durable and durable goods, respectively.<\/p>\n
Rubbing salt to the wound, consumer confidence is at levels last seen during the pandemic as well as the second quarter of 2022 when KwaZulu-Natal was hit with severe flooding, and the war in Ukraine just started to have global knock-on effects.<\/p>\n
In Q1 2023, consumer confidence decreased to a negative 23 points, after a slight improvement from negative 20 points in Q3 2022 to negative 8 points in Q4.<\/p>\n
The BER reported concerns surrounding the high cost of living as well as the electricity crisis as the main drivers for the poor sentiment.<\/p>\n
One of the most notable handbrakes on businesses is currently load shedding.<\/p>\n
Retailers are trying to mitigate the rolling blackouts by spending hard-earned revenue on backup power solutions.<\/p>\n
Some major retailers such as Pick n Pay, Woolworths and Shoprite have racked up bills into the millions for diesel to fuel generators.<\/p>\n
The BER did note, however, that on a more positive note, the selling and purchase price indices for retail goods may taper in the future, although they are being elevated currently.<\/p>\n