South African retail sales rise, but caution dampens expectations

Retail trade sales saw growth of 1.6% year-on-year in June, a figure that is far outpacing economic growth of 0.1% as of the first quarter yet is below expectations.

The disappointing number has been attributed to the fact that, while South Africans continued to spend on clothing and home improvement items, their caution in the face of economic uncertainty kept overall momentum in check.

Statistics South Africa data shows retailers in textiles, clothing, footwear and leather goods led the gains at constant 2019 prices, which strips out inflationary effects. This was followed by hardware, paint and glass stores.

However, general dealers – the largest segment of the market – weighed on the headline number, as did food, beverages and tobacco in specialised stores.

On a quarter-on-quarter, seasonally adjusted basis – the method used in gross domestic product calculations – retail sales recorded a more modest rise in the second quarter, suggesting the sector will still likely make a positive contribution to overall economic growth for the period, said Investec economist Lara Hodes.

Statistics South Africa said clothing and footwear stores were again the biggest contributors, with household furniture and “other” retailers also adding to the lift. Specialised food and drink outlets were the main drag.

Hodes said the June increase was smaller than expected, although the quarterly performance paints a more positive picture.

Consumer activity has been supported by low inflation and recent interest rate cuts, which have brought borrowing costs down by 1.25 percentage points since the start of the easing cycle, said Hodes. Real take-home pay, adjusted for inflation, remains higher than a year ago, she said, based on industry data.

While sentiment is still above the long-term average, global uncertainty, local economic headwinds and a rise in unemployment in the second quarter continue to weigh on consumer confidence, said Hodes.

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