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GOING NOWHERE SLOWLY

Stats SA’s latest figures show retail trade is feeling the pinch

Stats SA’s latest figures show retail trade is feeling the pinch
From left: A customer in a Johannesburg supermarket. (Photo: Waldo Swiegers / Bloomberg via Getty Images) | iStock | Unsplash

Four of the seven retail categories included in the index contracted on a year-on-year basis, with food, beverages and tobacco in specialised stores, as well as furniture, appliances and equipment remaining flat.

Consumers spent a lot less at hardware and general dealers in August, which is driving down retail trade sales. 

Stats SA released its latest retail trade data on Wednesday, showing sales in this sector had contracted by 0.5% year on year in August 2023, although not by as much as consensus projections of a 1.2% year-on-year slump (Bloomberg). 

The biggest contributors to this decrease were general dealers (-3.8%) and hardware, paint and glass retailers, which were down by 5%.

Seasonally adjusted, there was a slight uptick in retail trade sales (up 0.2% in August compared with July 2023), with 0.4% increases in June and July.

Year on year, retail trade sales were down by 1.1% in the three months ended August 2023 compared with the three months ended August 2022. 

Once again, the biggest drags on sales were general dealers (-3.9%) and retailers in hardware, paint and glass (-6.7%). Textile, clothing, footwear and leather goods retailers showed healthy growth of 9.2% over the same period, although seasonally adjusted, retail trade sales were up only by 0.2% in the three months ended August 2023 compared with the previous three months.

Textiles, clothing, footwear and leather goods were up by 3% while food, beverages and tobacco in specialised stores were up by 2%. This segment climbed by 11.3% y/y, after a 10.9% bump in July.

In the three months ended August 2023, compared with the three months ended August 2022, sales of food, beverages and tobacco in specialised stores, as well as furniture, appliances and equipment, were flat.

The semi-durables retail category (which includes clothing and footwear) appears to be continuing along the growth trend that emerged with the lifting of lockdown restrictions, as per the BER’s latest (Q3.23) retail survey, said Annabel Bishop, chief economist at Investec.

“Despite a deceleration in CPI inflation from levels recorded earlier in the year, which has offered some reprieve, consumers remain financially constrained,” she said.

“Interest rates – which are likely to remain at elevated rates for longer – continue to weigh on the indebted, with many consumers relying on credit to fund the high cost of living, while the expanded unemployment rate (which includes individuals who desire employment regardless of whether they are actively seeking work) is above 42%, demonstrating the extent of SA’s unemployment predicament.”

Although sentiment did pick up among retailers in Q3 in the non-durable goods and semi-durable goods sectors, Bishop said retailers continue to face several operational challenges, notably rolling blackouts. 

David Omojomolo, economist for Capital Economics, said overall, the economy struggled to grow in Q3 and tight policy means that growth in 2024 will be modest at best.

Last week’s data for the industrial sector showed that it fared better than in the previous month, he said, as manufacturing output increased by 0.5% month on month, driven by improvements in wood, metals and motor vehicles output, although these were offset by weakness in sectors like food.

Mining sector production was also up by 0.8% m/m in August, with improvements in the output of iron ore and platinum group metals.

“While the results from industry were encouraging, on their own they will not be enough to change what has been a weak third quarter of growth. On a 3m/3m (quarter-on-quarter) basis, which aligns with quarterly GDP growth, mining output decreased by 2.1% in August and manufacturing production fell by 0.5%. Retail sales posted a small rise of 0.2%. 

“We think GDP was probably flat in (quarter-on-quarter) terms in Q3.” DM

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