Investec economist Lara Hodes said January is always a hard month for consumers as data also showed that average real take-home pay was down a notable 13.7% during the month. Picture: Supplied
South African households had to cut their spending on essential food and beverages in January as the cost of living stifled consumption, but increased spending on clothing and footwear due to the reopening of schools.
Data from Statistics South Africa (Stats SA) yesterday showed that retail sales volumes kicked off 2023 on a sour note, driven by less consumption of food and beverages.
Stats SA said retail trade shrank by 0.8% in January compared to the same month a year ago, following a downwardly revised 0.5% decrease in December 2022.
This was the second consecutive month of declines in retail activity which was broad-based, with five out of the seven categories recording a slide in volume sales.
Food and beverages recorded the deepest decline at 7.3% year-on-year, followed by hardware material and pharmaceuticals at 4.8% and 2.0%, respectively.
The hardware, paint and glass category has seen nearly two years of consecutive monthly declines after enjoying significant growth due to the boom in DIY projects during the hard lockdown.
Investec economist Lara Hodes said January was always a hard month for consumers as data also showed that average real take-home pay was down a notable 13.7% during the month.
Hodes said they did not anticipate a meaningful pick-up in household consumption expenditure which makes up around two-thirds of the gross domestic product, in the short-term.
“In general, consumers remain constrained and continue to contend with heightened living costs, with many holding back on discretionary purchases,” Hodes said.
“While consumer price inflation is on a downward trajectory which should provide some reprieve to consumers; sentiment is expected to remain lacklustre, only lifting notably when domestic conditions improve.
“Retailers are also having to contend with the dire electricity supply situation which continues to impede their ability to operate optimally.”
However, clothing and footwear held the fort in January, increasing by 2.3% year-on-year, supported by general dealers at 0.3%.
Analysts said these categories likely benefited from back-to-school related spending in the month of January.
On a monthly basis, retail trade rose by 1.5% in January, the most in a year, after a downwardly revised 0.5% fall in December and a 1.1% increase in November.
Retail trade sales eased by 0.2% in the three months ended January 2023 compared with the three months ended January 2022.
FNB senior economist Siphamandla Mkhwanazi concurred with assumptions over depressed household consumption expenditure, saying they expected household consumption growth to decline to around 1.5% in 2023, from 2.6% in 2022.
Mkhwanazi said they also anticipated that the sluggish economic environment would further hinder the employment recovery in 2023 while the wage growth would likely be subdued, in part due to the impact of load shedding on corporate margins.
He said growth in non-labour income, which has been driving the post-lockdown income recovery, was also expected to moderate, primarily due to base effects, weaker corporate earnings growth, and subsequent dividend payouts.
“Another downside is the depletion of household financial buffers, including savings, which up until recently had allowed them to weather the economic downturn. These, combined with elevated inflation, suggests continued financial pressure on households,” Mkhwanazi said.
“On the other hand, the credit market remains active, with consumers accumulating consumption credit at a faster pace, which could provide auxiliary support to household consumption.
“However, this may also increase the risk of credit defaults due to slower income growth and the accumulation of more expensive lines of credit, resulting in strained household financial positions down the line.”
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