SA retail sales declined less than expected in January though they expanded in the month when adjusted for seasonal factors, offering a ray of light to the moribund economy.
Retail sales declined 0.8% year on year, but seasonally adjusted sales increased by 1.5% in the month, Stats SA reported on Wednesday. Economists surveyed by Reuters had expected a 2% annual decline.
“Yes, on the day better than expected, but in the bigger picture still dismal, so the pressure has not gone away,” independent economist Elize Kruger said. “The elevated inflation and interest rates, additional costs due to ongoing load-shedding are still our undesirable reality.”
Food, beverages and tobacco in specialised stores, along with hardware, paint and glass, were the main drags on the annual decline, Stats SA said.
However, the DIY market contracted 4.8% at the slower pace compared to previous months when declines were in the double digits. It has been normalising off a high base reached during the height of the Covid-19 lockdowns when households spent money to improve their homes.
Textiles, clothing, footwear and leather goods rose 2.3%, slowing from 3% in December.
Retail sales in December, which is traditionally a busy month for the sector, were revised to a 0.5% decline. As is the case with most sectors, retailers are grappling with the effects of load-shedding, which has not only increased operating expenses, but also affected the number of people shopping.
“In general consumers remain constrained and continue to contend with heightened living costs, with many holding back on discretionary purchases,” Investec economist Lara Hodes said in a note. “While consumer price inflation is on a downwards trajectory, which should provide some reprieve to consumers, sentiment is expected to remain lacklustre, only lifting notably when domestic conditions improve.”
The retail sales followed the release of mining and manufacturing output for January, which while uninspiring, were better than expected. The data raised hopes that SA could escape the technical recession in the first quarter, defined as two successive quarters of economic contraction.
However, while economists say it is still too soon to draw conclusions on how the first-quarter GDP could look, they warn that endless load-shedding poses a downside risk to the economic outlook.
“The outlook for now looks weak and unlikely to improve unless Eskom reduces its load-shedding intensity, Transnet improves performance and commodity prices rise,” said George Glynos, head of research at ETM Analytics, in reacting to the mining production figures.
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