SA retail trade expectations mixed
September 18, 2007
By Evan Pickworth
Johannesburg - While views are somewhat mixed on South Africa's July retail inflation data, due on Wednesday, a slowdown from the heights reached in the first quarter is generally expected.
"The year-on-year rate of increase in real retail sales probably recovered in July following a surprisingly low 6.4% reading in June, but is likely to have remained below the circa-9.5% growth rates that prevailed in Q1 of the year and in 2006 as a whole - consistent with a moderating underlying trend in consumer demand," said Citigroup chief economist in South Africa, Jean Mercier.
"The soft June reading was probably exaggerated by some temporary factors, including the introduction of the National Credit Act (NCA) - which probably delayed approval of some consumer loans - and a strike by public-sector workers," he added.
Independent economic analysts spoken to by I-Net Bridge say: "Retail sales growth moderated in June as expected. Retail sales growth in July is expected to be even lower than June's growth, particularly after a sharp decline in the rate of growth in household consumption expenditure in the second quarter.
"The NCA, interest rate increases and rising prices will continue to be the main cause of slower retail sales growth in months to come."
Statistics South Africa announced on Tuesday last week that retail trade sales data for July has been delayed until Thursday September 20 at 11.00am.
The delay was because they were not currently satisfied with the response rates for the month in which the surveys were conducted, partly due to the collection of two samples for each survey over the last couple of months.
Mercier said there are also reasons why he does not expect a spectacular rebound in July.
"First, part of the impact of the NCA is expected to last, as it effectively limits the access to credit of the more 'risky' borrowers.
"Second, industry evidence about turnover in July has been mixed at best, suggesting that the mix of past rate hikes and somewhat higher goods inflation is gradually taking its toll on real spending," he said.
South African retail trade sales at constant (2000) prices for June increased by 6.4% year-on-year (y/y) compared with May's revised 9.2% (9.0%) increase.
The numbers are being keenly monitored for signs of a slowdown in consumption in the face of 300 basis points in rate increases since June 2006.
The next meeting of the Monetary Policy Committee takes place on October 11.
Retail Trade Sales: (y/y growth; constant 2000 prices) June: 6.4% May: 9.2% April: 5.9% March: 10.5% February: 8.0% January: 9.9%.
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