South Africa July retail sales at -3.9 pct yr/yr
September 21, 2009
South Africa's retail sales fell by 3.9 percent year-on-year in July at constant prices, compared to a revised 6.9 percent contraction in June, Statistics South Africa (Stats SA) said on Monday.
Stats SA said retail sales decreased by 5.1 percent in the three months to July, compared to the same period a year ago, also at constant prices.
Economists polled by Reuters last week forecast a 6.0 percent year-on-year fall in retail sales for July.
ANALYST COMMENT
PETER ATTARD MONTALTO, EMERGING MARKETS ECONOMIST, NOMURA
"Retail sales for July are much better than expected and this number points to the economy exiting recession during Q3 as well as supporting our above consensus GDP forecast for this year based on a faster bounce back in the economy.
"A key call we have had this year is that household balance sheets have not been as badly hit as many people think.
"This data point will be important for the SARB given their concentration on consumption. Also key is that whilst South Africa's recession is indeed lagging the rest of the world it is not going to necessarily be of greater length than similar emerging markets.
"Retail sales should continue to improve from here in the coming months given the pass through of previous interest rate cuts, though with the stresses that do exist on households we are unlikely to see the previous rapid growth rates of 10-15 percent in the medium term.
"We continue to see rates unchanged tomorrow at 7.00 percent after this number assuming no big surprises from CPI."
SALOMI ODENDAAL, ECONOMIST, CITADEL
"It seems like the pace of the deterioration in retail sales has improved somewhat. One can expect the lower interest rates to filter through and improve consumers' ability to spend -- although consumers are still under pressure. Wage increases, specifically in the private sector, have been mostly below inflation.
"We may have seen the worst of the recession in the retail sector but conditions should still remain tough for quite a few months.
"We still expect interest rates to be cut another time before the end of the year -- if not tomorrow then at the October meeting."
RONEL OBERHOLZER, SENIOR ECONOMIST, IHS-GLOBAL INSIGHT
"It has improved year-on-year. It is looking much better than what we thought.
"You can see monetary loosening coming through, but I'd be a bit cautious about the interest rate assumption. If it looks that much better then, maybe, it's not that positive for an interest rate cut at this stage as it seems to be improving more quickly than we thought."
GEORGE GLYNOS, MANAGING DIRECTOR, ETM
"I saw the consensus and did not understand that (large number). I think that this is a better number that shows that we have seen the worst of this data and that we are now in the window where monetary policy is going to have a positive effect in the consumer driven data.
"If anything, this would suggest policymakers need to hold off for another round to see if the monetary policy easing announced so far is having a meaningful effect."
MARKET REACTION
The rand was little moved at 7.5150 against the dollar at 11:52 SA time from 7.5275 just before the data was released at 11:30 SA time. The yield on the 2015 bond was at 8.10 percent from 8.095 percent.
BACKGROUND
- South African retail sales growth has cooled sharply over the past year after a number of years of strong growth that helped lift expansion in the overall economy to around 5 percent.
- Retail sales are expected to stay under pressure in 2009 due to job losses and a recession.
- Sales have partly been hit by 500 basis points' worth of interest rate increases between June 2006 and June 2008 as the central bank sought to rein in inflation.
- The Reserve Bank has however reduced rates by 500 basis points since December last year to help the economy, mired in its first recession in nearly two decades.
- The central bank started a 2-day meeting on Monday to decide the next move on rates, and analysts polled by Reuters expect the key repo rate to stay on hold at 7.0 percent on inflation worries. - Reuters
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