Skip to main content

Poor start to the year as retail sales fall

| Economic factors

Retail sales contracted 2.3% in January, suggesting the sector might struggle to pull itself out of its depressed state. It was the biggest monthly contraction since the 2009 recession.

According to analysts, the immediate future does not look good either.

Consumers are choking on debt and the budget’s constraining effects on income will start to kick in.

“This is not a good start at all. We’re seeing such mild economic growth. We’re at a trough,” Meganomics economist Colen Garrow said.

“Low confidence on the business and consumer side, high inflation and tough economic and financial conditions drove retail sales down, coupled with January seasonally being a difficult month.

“People don’t feel confident spending their money. This is the biggest sector for GDP so it’s going to be subtracted,” he said.

Retail sales rose 1% in December 2017.

“While the contraction is partly due to base effects, high inflation, weak household credit extension and the lag effect from the interest rate hike last year also explain the weakening trend in retail sales,” First National Bank economist Mamello Matikinca said.

The retail sector is an important indicator of consumer spending, which drives growth in the economy.

Standard Bank economist Thanda Sithole said “2016 was the bottom of the economic cycle but the consumption side will continue to weaken. GDP will mainly be boosted by net exports, which should make it better than 2016.”

Sithole also expected negative annual growth in retail sales to persist in 2017 because of tighter credit conditions.

Investec economist Kamilla Kaplan said: “Consumers’ ability and willingness to spend has been constrained.”

Business confidence has not picked up. The RMB/BER Business Confidence Index increased a marginal two points to 40 in the first quarter of 2017. While confidence among retailers increased by 11 points to 45, respondents remained unsatisfied with business conditions.

RMB said: “Growth in total retail sales volumes is showing few signs of life and in some instances it’s even contracting, with the rate of increase in selling prices slowing quickly on a broad basis.

“After a brief period of some relief, pressure on margins has consequently returned.”

Pin It

Related Articles

Petrol price hike on Wednesday, but some diesel...

By: News24   Petrol will be hiked on Wednesday (03/04/2024), while wholesale diesel prices are mixed.  

SPAR shares tips on how to lighten the financia...

For many, Easter is a time of celebration and tradition, marked by gatherings with loved ones and delicious meals. However, the financial strain brought on by the increased cost of living may require families to adjust their usual celebrations, wh...

Reprieve for consumers at till as prices tick m...

By: Given Majola - IOL Business Consumers got a reprieve at the till this month as the cost of the average household food basket showed a marginal increase.

SA consumers feel the big squeeze: 99% have cha...

According to NIQ, 44% of South African consumers feel they are in a worse financial position this year compared to a year ago.

SA consumers are swapping Easter eggs for house...

By: Dhivana Rajgopaul – IOL Business South African consumers are choosing to prioritise buying household food essentials, instead of spending money on Easter eggs.