Annual retail sales rose briskly in April even as rising inflation and interest rates are set to strain household finances.
Retail sales rose at 3.4% year on year, the biggest increase since January and well above the Bloomberg median estimate of 1.7%.
Independent economist Elize Kruger said the stronger-than-expected retail sales pointed to a bigger momentum in consumer spending than is generally perceived.
“A couple of factors that could have played a role in the resilience of retail sales include some job creation in the first quarter that would have resulted in positive spillover effects on spending, further gradual recovery in the hospitality sector, and the extension of the social relief of distress grant,” Kruger said.
SA’s official unemployment rate eased to 34.5% in the first quarter from a record high of 35.3% in the December quarter, reflecting a broader economic recovery from Covid-19. But the global economic environment has changed since then, dimming domestic prospects.
Like the rest of the world, SA is grappling with sky-high fuel and food prices, worsened by Russia’s invasion of Ukraine. Rising consumer prices are expected to trigger more interest rate increases.
The Reserve Bank, which began its hiking cycle in November, is likely to tighten policy by 50 basis points when its monetary policy committee meets in July.
Nedbank economists said in a note that the termination of most lockdown restrictions would support employment and income throughout the year, resulting in increased spending.
However, general economic conditions remain subdued, they added, citing the impact of Russia’s invasion of Ukraine on domestic inflation, which could lead the Bank to tighten its policy at a faster pace.
“Furthermore, tighter global monetary policy in response to surging inflation makes the rand vulnerable to weakness, adding further upward pressure on the price of imported goods. These factors are expected to erode consumers’ spending power and negatively impact retail trade,” the economists said.
The biggest contributors to sales were general dealers, household furniture, appliances and equipment, along with textiles, clothing, footwear and leather goods, Stats SA said in a statement on Wednesday.
“The general dealers’ grouping made the largest positive contribution to April’s top-line outcome, largely owing to its significant weighting in the index,” said Investec economist Lara Hodes.
“Moreover, the textiles, clothing, footwear and leather goods category contributed a further 1.1% points to the top-line number on the back of growth of 6.4% year on year. Contrary to the hardware segment, this category of the retail basket has benefited from individuals returning to work and generally spending more time outside their homes as lockdown restrictions have largely been removed.”
All other retail categories registered growth except for hardware, paint and glass. That category contracted for a tenth consecutive month, reflecting the apparent slowdown in home renovations.
On a monthly basis, retail sales were down a better-than expected 0.2% after a revised 0.8% decline in March, Stats SA said.
Update: June 16 2022
This story has been updated with additional information.
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