THE BUYING power of South African shoppers could shrink slightly this year as prices of consumer goods continue rising, reversing an impressive growth in retail sales, which started the year on a positive note.
According to data from Statistics South Africa (StatsSA), retail trade sales surged by 7.7 percent year-on-year in January to reach R76.9 billion.
The January retail sales print was up from an upwardly revised 3.2 percent rise recorded in December 2021, and above market estimates of a 4.9 percent gain.
This was the fifth consecutive month of growth in retail activity and at the fastest pace since last June.
StatsSA’s deputy director for distributive trade statistics, Raquel Floris, said this year-on-year rise was largely driven by general dealers, retailers in food, beverages and tobacco products in specialised stores, and textiles, clothing, footwear and leather goods.
“Sales in food and beverages jumped by a significant 17.9 percent while clothing and textile stores recorded growth of 17.4 percent,” Floris said.
“[But] not all retailers recorded positive results in January. The hardware, paint and glass, and pharmaceuticals, medical goods and cosmetics categories both registered a year-on-year decline in sales.”
Nedbank’s senior economist, Nicky Weimar, said the recovery in the retail sector was broadly expected to continue this year, supported by limited restrictions on economic activity and better job prospects.
“However, the pace of recovery will be challenged by high inflation, especially food and fuel, rising interest rates and low wage growth,” she said.
"Furthermore, the probability of new Covid waves could place added pressure on the recovery, but this will depend on the extent of the lockdown restrictions.“
On a monthly basis, retail trade increased 1.5 percent in January after an upwardly revised 1.7 percent rise in December, thus representing a marginal drop of 0.2 percent.
The Don Consultancy Group (DCG) chief economist Chifi Mhango said the year-on-year retail sales growth rate of 7.7 percent was the highest since the July 2021 unrest.
Mhango said although signs of improvements in retail sales growth rate for South Africa continued, consumers were still facing pressure due to rising costs of living.
“Fuel prices and food prices are on the rise, with debt levels and rising unemployment negatively impacting daily livelihood affordability,” he said.
“Retail sales are projected to improve globally as more economies open up more from restrictive Covid-19 regulation with relaxation of curfews.”
In the three months ended January, seasonally adjusted retail trade sales increased by 4.3 percent compared with the previous three months.
Investec economist Lara Hodes said base effects were partly responsible for the notable uptick after January 2021’s decline of 3.9 percent, a period plagued by stringent lockdown measures.
Hodes said the lifting of travel bans by key tourist markets following their abrupt enforcement following the discovery of the Omicron strain had also supported the uptick in spend.
“Despite this positive result retailers continue to face a number of challenges including electricity supply concerns and supply side bottlenecks associated with the pandemic, while many consumers still remain financially challenged,” she said.
“Unemployment is sitting at just under 35 percent while rising administered prices continue to dilute disposable incomes.”
BUSINESS REPORT ONLINE