A second consecutive month of contracting retail sales underscored the difficult recovery ahead for the sector, after civil unrest in July disrupted businesses in SA’s economic hubs of KwaZulu-Natal and Gauteng.
Retail sales figures for August shrank 1.3% year on year, down from July’s revised contraction of 1.2%, defying market expectations for a firm rebound from the effects of violent looting of shops, warehouses and distribution centres.
July’s figures were revised sharply down from the previous decline of 0.8%, according to data from Stats SA released on Wednesday, suggesting the hit taken by companies such as Clicks, Massmart and Mr Price may be worse than previously believed, according to economists.
The month-on-month seasonally adjusted data, however, showed that sales grew 4.9% in August, up from July’s dramatic decline of 11.1%.
This, however, pointed to an “incomplete recovery” from the looting, said FNB senior economist Siphamandla Mkhwanazi, in a note. According to Mkhwanazi, August’s sales volumes showed that the effects of the riots on the sector might be bigger than initially thought.
“The out-turn suggests that the moderation in Covid-19 infections and the consequent easier lockdown restrictions were not enough to lift sales volumes to pre-riot levels,” said Mkhwanazi.
Delays in rolling out the reinstituted social relief of distress grants and the temporary employer/employee relief scheme (Ters) also likely hampered retail sales volumes growth in August, he added.
According to Stats SA, the categories that were the largest contributors to the contraction were general dealers; retailers in hardware, paint and glass; “other” retailers — which includes online retailers — and retailers of household furniture, appliances and equipment.
The month-on-month uptick was “discouraging to say the least” when taking into consideration the magnitude of the slump in July, said Oxford Economics Africa analyst Pieter du Preez.
“Despite an easing of restrictions, the country remained on alert level 3 lockdown in August, which would have had a negative effect on consumer confidence,” he said.
“In addition, we expected the July unrest to have a lasting effect on the retail sector, as the riots and looting … exacerbated supply chain disruptions.”
Nedbank economists Candice Reddy and Nicky Weimar said the consequences of July’s events will linger until businesses are restored to full capacity.
“Improvements on the jobs front and the ability to limit restrictions on economic activity will be vital in rebuilding demand,” they said.
Though eased lockdown restrictions and low interest rates will help support the sector, particularly as the year-end shopping season approaches, long-standing structural constraints will contain the recovery, they noted. These include power supply shortages and further waves of Covid-19 infections.
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