On a monthly basis, sales declined 0.1% in July, which is effectively a flat number compared with June. In the three months to July, sales fell 1.3%. The annual number was inflated by base effects stemming from the July 2021 riots. 

So, the data hardly suggest a significant recovery in the sector, and it is never a good sign for the wider economy when South Africans are not spending like drunken sailors.

“The loss of momentum in monthly sales volumes, which is more informative given the base effects, is consistent with mounting pressure on consumer discretionary incomes due to rising interest rates and a higher cost of living. The month of July saw fuel prices increasing by R2.57, the biggest margin on record. This would have adversely affected consumer sentiment and their ability to spend on other goods,” Siphamandla Mkhwanazi, FNB senior economist, said in a note on the data. 

“Resilience in consumer spending has been underpinned by robust growth in non-labour income, a continued drawdown on savings accumulated during lockdown, as well as a lift in consumption credit uptake. Nevertheless, consumers are confronted by higher prices, rising interest rates, and slow growth in employment, which could ultimately dampen the recent spending resilience.”

Consumer inflation is running at 7.8% and the Reserve Bank is in a hiking cycle which has already raised interest rates by 200 basis points. There are hopes that inflation is at or near its peak as oil prices have cooled of late, delivering some much-needed relief for South African consumers at the pump. But rates are still expected to climb as the central bank is determined to stop inflation in its tracks and protect the value of the fragile rand. 

On top of all of this, the economy contracted in the previous quarter and even if a recession is averted, growth this quarter will be anything but robust. South Africans are not about to spend their way to prosperity. DM/BM