Analysts cautious of retail sales data that point to recession easing
September 22, 2009
By Florence de Vries
South Africa may be easing out of a recession if retail sales for July are anything to go by, but analysts believe it is imprudent to assume this based solely on one month's figures.
Statistics SA data released yesterday show retail trade sales in July fell 3.9 percent on an annual basis, the smallest drop since January following a revised 6.9 percent fall in June.
In the three months to July, retail sales - a key barometer of consumer spending - contracted by 5.1 percent compared with the same period last year.
Warren Buys, a retail analyst from Cadiz Asset Management, said it was difficult to draw conclusions based on one month's figures.
He used wholesale retailer Massmart's figures as a proxy for what might be happening in the retail economy as the group represented several industries, including building, hardware, food and clothing.
In July Massmart said it had still experienced negative real turnover growth for the full year to June, reflecting the underlying pain that still persisted in the economy.
"But the retail sales are an improvement on the substantial decline in June, which shows we are moving toward a positive environment," he said.
Most retailers recorded a decline in sales in real terms, led by retailers in hardware, paint and glass (minus 13.1 percent year on year), and furniture (minus 12.7 percent year on year).
As illustrated in the results of retailers like AVI recently, sales of cosmetics and toiletries continued to record an increase in July.
Roger Tejwani, an analyst at Credit Suisse Standard Securities, said the improvements were broad based and signs of life in later-cycle categories like furniture and appliances were encouraging.
He shared Buys's view that it was dangerous to focus on one month's data in isolation, but felt the likelihood of sequential improvements for the rest of the year had increased.
"It's been an early start to summer, which bodes well and ongoing rand strength should be lowering input cost inflation," said Tejwani. "If reflected in pricing, volumes could be further stimulated."
Kevin Lings, an economist at Stanlib, said retail trading conditions were likely to continue to stabilise in the months ahead, and then slowly improve next year.
Woolworths said that it was conscious that economic conditions would remain tough for the rest of the year.
"We believe that we have a better-positioned merchandise offer, without any compromise to our quality," said the retailer.
"We will remain focused on managing costs and controlling our stock throughout this period. The improvement in sales experienced in the fourth quarter has continued into the first eight weeks of this year."
Annabel Bishop, an economist from Investec, said she expected retail sales growth to remain negative and only turn positive towards the later part of the first quarter, adding that a recovery in consumer confidence would be crucial.
Bishop said: "Falling disposable incomes and high indebtedness of households will slow the pace of economic recovery despite a moderation in inflation and lower debt servicing costs."
Shoprite Group's marketing director Brian Weyers said for all comparable periods as published in Statistics SA findings, the Shoprite and Checkers chains showed a positive growth in sales.
While Bishop believed the Reserve Bank's monetary policy committee (MPC) would cut interest rates by 50 basis points today, Thebe Securities posited that the apparent improvement in retail activity in July was likely to count against members wishing to argue for another rate cut.
It said: "On a balance of probabilities, we believe the MPC will opt to leave interest rates on hold, highlighting tentative signs of recovery."
|
|
