Retail sales continued to be weighed down by load-shedding in October with general dealers among the hardest hit, indicating that poorer households remain under immense strain.
Data published by Stats SA on Wednesday shows retail trade declined 2.5% from a year earlier, while market estimates were for a 0.9% increase. The decline is the steepest since May, according to Trading Economics.
It follows an upwardly revised 1% year-on-year rise in September — which avoided nine consecutive months of contraction. It was mainly due to higher-income households that are insulated from current headwinds.
RMB analysts said the September outcome was made possible by retail support such as lower inflation and stable interest rates.
On a monthly basis, retail sales fell 1.2% in October, the most in more than a year, after a revised 0.1% drop in the previous month.
FNB senior economist Siphamandla Mkhwanazi said the setback in October likely reflects consumers’ delayed shopping decisions in anticipation of Black Friday deals in November.
He added that year-to-date volumes are 1.5% lower than the same period last year, “underscoring the challenging consumer backdrop with cost-of-living pressures weighing on consumers’ discretionary incomes”.
Stats SA data shows the decline was broad-based, with only one out of seven categories recording an expansion in annual volumes. Clothing and footwear retailers saw positive momentum, with 7% year-on-year volume growth, contributing 1.2 percentage points to the headline number.
The biggest decreases in retail activity were due to reduced sales at general dealers, which contracted 5.7%. Sales for retailers in the hardware, paint and glass category fell 6.6%, while the decline for “other” retailers was 3.7%.
Mkhwanazi said October’s retail activity was in line with FNB’s expectations, especially after the release of the FNB/BER consumer confidence index. It continued on a downward trajectory, edging slightly lower to minus 17 index points in quarter four from minus 16 in the third quarter, the lowest festive season reading in more than 20 years.
“In the same breath, sentiment among retailers, though improved from 32 to 47 in quarter four, shows the uptick to be driven by improvements in profitability and general business conditions on the back of less intense levels of load-shedding at the time of the survey, rather than improved sales growth,” he said.
“Overall, we maintain our view of subdued growth in household consumption expenditure for the short to medium term.”
Investec economist Lara Hodes said consumers remain severely constrained while retailers continue to grapple with many domestic challenges, most notably load-shedding.
Absa senior economist Miyelani Maluleke said the data shows that consumer demand is under pressure and provides more clues about fourth-quarter GDP growth.
“Household consumption expenditure fell for two consecutive quarters in quarter two and quarter three,” Maluleke said. “The sharp fuel price hikes in October will have added further pressure on disposable income for many households.”
Update: December 13, 2023. This article has been updated throughout.
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