THE EMERGENCE of the Covid-19 Omicron variant could pose a downside risk to the retail industry in spite of positive sentiment in October as the retail sector grew for the second consecutive month, albeit at a slower pace.
Statistics South Africa (Stats SA) yesterday reported that retail trade sales grew by 1.8 percent in October from a year ago, buoyed by the pharmaceutical and textile categories.
This retail sales reading was in line with market expectations of a soft rebound from a 2.1 percent surge in September.
Stats SA said sales were higher at pharmaceuticals and medical goods, cosmetics and toiletries at 14.8 percent in October from 10.6 percent in September.
Sales slightly eased for textiles, clothing, footwear and leather goods by 6.2 percent in October from 11.5 percent in September.
But sales declined for food, beverages and tobacco, recording a contraction of 1.9 percent in October compared to a 2.8 percent growth the previous month.
Household furniture, appliances and equipment also declined to 0.9 percent and hardware, paint and glass also eased.
Investec economist Lara Hodes said consumers remained financially constrained, and many had not recovered from the effects of the pandemic, with the unemployment rate climbing to record highs while elevated administered prices continued to dilute disposable incomes.
“Although conditions have improved from those experienced in the second quarter of last year, retailers continue to face a myriad challenges.
“Persistent global supply chain constraints have resulted in longer lead times and stock shortages which have driven up input costs.
“Retail inflation is notably below the headline CPI inflation rate as retailers struggle to pass on costs in an environment where competition is fierce and demand is muted.
On a monthly basis, StatsSA said retail trade fell 1.3 percent, down from a 6-month high of 5.1 percent in September.
In the three months to October, sales declined by 0.1 percent compared to the previous three months; however, compared to the same period last year, retail sales rose by 0.8 percent.
Nedbank senior economist Nicky Weimar said overall, the sector remained 0.8 percent lower than the 2019 average, but 0.3 percent higher than the October 2017 to 2019 average.
Weimar said this recovery seen in October was expected to continue for the rest of the year as low interest rates, and slightly firmer labour market conditions encourage greater consumer spending.
“Black Friday sales and festive season shopping should provide added support,” Weimar said.
“However, higher food and fuel prices, low consumer confidence, and the possibility of tighter lockdowns in light of the fourth wave would pose downside risks to the sector’s recovery.”
BUSINESS REPORT ONLINE