Business Maverick

ECONOMIC OUTLOOK

SA’s weak September retail trade sales point to possible recession

SA’s weak September retail trade sales point to possible recession
Trade Route Mall in Lenasia, Gauteng, South Africa, on 14 October 2021. (Photo: Leila Dougan)

Retail trade sales in South Africa declined by 1.9% in the third quarter (Q3), data released by Statistics South Africa (Stats SA) showed on Wednesday. This increases the chances that the economy fell into a recession and the path out will be arduous, to say the least, amid Eskom’s mounting woes.

Black Friday is next week and retailers will be praying that South African consumers have been saving for it, because they have hardly been flocking to the shops.  

Stats SA said on Wednesday that retail trade sales had declined by 0.6% in the year to September after growing by a paltry 0.1% on a monthly basis. That added up to a 1.9% fall in the three months to the end of September, the second straight quarterly decline on the retail front. This increases the chances that South Africa’s economy fell into a recession after contracting by 0.7% in Q2. And if there was growth during the quarter, it would be tepid at best. 

The category “food, beverages and tobacco in specialised stores” saw an 8.1% fall in sales on an annual basis, suggesting that South Africans are not eating, drinking and merrily misbehaving as much as they have in the past. “Hardware, paint and glass” sales dropped by 8% in the year to September, which may signal that lockdown-inspired DIY projects have lost some of their appeal. 

Overall, soft retail sales can be explained by the usual suspects, including South Africa’s stagflationary environment of sky-high unemployment and high inflation, even if the latter may have peaked in July. Rising interest rates have also been curbing demand. The South African Reserve Bank has hiked its key repo rate by 275 basis points since last November, bringing the prime rate to 9.75%, and another increase is on the cards next week.  


Visit Daily Maverick’s home page for more news, analysis and investigations


Meanwhile, rolling blackouts continue to disrupt smaller retailers who cannot afford backup power systems. 

More widely, the September retail data bode ill for economic growth. 

“Our forecast was 0.4% quarter on quarter seasonally adjusted for Q3 growth, but this could be 0.2% to 0.3% now. But there is downside risk,” Annabel Bishop, group chief economist at Investec, told Business Maverick

Jee-A van der Linde of Oxford Economics Africa said its forecast was for a slight contraction, heralding what economists would dub a “shallow recession”.   

And the outlook for consumer spending is bleak, though Black Friday and Christmas should blunt some of the sting for retailers. 

“Resilience in consumer spending appears to be waning. We note that households have been accumulating unsecured [consumption] credit more rapidly in the last few months, following a pandemic-related deleveraging trend. This is consistent with depleting household savings, subdued real income growth and generally higher costs of living, and may be indicative of a household budget squeeze,” FNB senior economist Siphamandla Mkhwanazi said in a note on the data.  

“As such, we continue to expect household consumption expenditure growth to average 2.9% this year from 5.6% last year as consumer headwinds persist. In the near term, retail sales could be temporarily supported by Black Friday and festive season-related spending.” DM/BM 

Gallery

Comments - Please in order to comment.

  • Wilfred Walker says:

    I think we need to careful not to get ahead of what is actually happening on the ground. I think that we haven’t nearly seen the start of an upward inflationary spiral. Yesterday I received an advisory that our cement supplier will be increasing their prices across the board by 20% on 9th January 2023.
    I’m sure that they are not the only ones feeling the pinch of massive coal price increases, diesel, electricity, wages, etc. etc. increases yet. We’re only at the start now.

Please peer review 3 community comments before your comment can be posted

X

This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.


Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

We would like our readers to start paying for Daily Maverick...

…but we are not going to force you to. Over 10 million users come to us each month for the news. We have not put it behind a paywall because the truth should not be a luxury.

Instead we ask our readers who can afford to contribute, even a small amount each month, to do so.

If you appreciate it and want to see us keep going then please consider contributing whatever you can.

Support Daily Maverick→
Payment options

Become a Maverick Insider

This could have been a paywall

On another site this would have been a paywall. Maverick Insider keeps our content free for all.

Become an Insider

Every seed of hope will one day sprout.

South African citizens throughout the country are standing up for our human rights. Stay informed, connected and inspired by our weekly FREE Maverick Citizen newsletter.