SA retail trade sales contracted on an annual basis in April, marking the fifth consecutive month of drops and at the quickest pace since June 2022, as the adverse effects of the prolonged power crisis continued to bite.
Data released by Stats SA on Wednesday shows retail trade shrank 1.6% from a year earlier after a downwardly revised 1.5% fall in March and compared with market estimates of a 1.4% decrease.
The contraction was attributed to the general dealers component, which contracted 2.8% in April after March’s 1.8% drop. Other negative contributors include the food, beverages and tobacco in specialised stores component, which contracted 6.2%, and the other retailers component, which fell 4.2%
On a monthly basis, retail sales rose 0.4% in April after two successive months of declines. Retail sales capture the demand-side strength of a country’s economic growth.
FNB senior economist Siphamandla Mkhwanazi said that while the slight increase in the month-on-month number, together with monthly mining and manufacturing production data, may suggest a reasonable start to second-quarter GDP, longer-term trends suggest waning consumer resilience with more hurdles on the horizon, including the cumulative impact of past interest rate decisions.
Year to date, volume sales are lower by 1.1% compared with the same period last year, he said.
Mkhwanazi said high-frequency bank credit data suggests consumers are still accumulating consumption credit at a relatively fast pace.
“The slowing pace in the last few months likely reflects a tightening in lending standards, as high living and debt servicing costs continue to erode consumers’ affordability. We expect that lending standards will tighten further, as the cumulative impact of past interest rate decisions filters through and in turn weighs on shopping activity,” Mkhwanazi said.
He added that from an income perspective, the sharp increase in production and operational costs induced by load-shedding is expected to weigh on corporate margins and, consequently, employment and wage gains.
“This, combined with elevated inflation and rising debt servicing costs, as well as depressed consumer confidence, suggests a muted household consumption expenditure growth prognosis,” he said.
The strain was also captured in the SA Chamber of Commerce and Industry (Sacci) business confidence index released on Wednesday, which showed a fall in business confidence to 106.9 in May from 107.1 in April. That reflected lower trade volumes, fewer tourists and a weaker rand exchange rate, which has continued to weigh on sentiment.
Sacci economist Richard Downing said the substantial swing from a surplus on the trade account in the first four months of 2022 to a notable deficit in the first four months of 2023 not only reflects the effect of global trade on SA, but also indicated the country’s economic sensitivity to international trade relations.
“This volatility affects business and investor confidence and eventually economic performance, employment and wealth,” Downing said. “Threats of losing out on lucrative trade agreements may dent an important element of SA’s economic relationships and wellbeing.”
Sacci CEO Alan Mukoki said a large part of the loss of business confidence could be regained by following the best global economic and business interests of SA and attending to local structural impediments.
With a global economy that is slowly recovering to perform optimally it is essential that attention is paid to placing SA back on a path to attracting foreign investment and extending lucrative trade relations, Mukoki said.
Update: This article has been updated with economists’ comments.
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