DECLINING RETAIL SALES, CONSUMER SPENDING POINT TO WEAKNESS OF SOUTH AFRICAN ECONOMY

JOHANNESBUIRG,The South African economy is still weak, with consumer spending and business confidence declining, with the latest figures released by Statistics South Africa showing that retail sales declined by a disappointing 2.3 per cent in January.

Economists say this shows that consumers are still under a lot of pressure although they expect the situation to improve in the coming months.

Retail trade numbers released by Stats SA were below what the market had expected and economists said if this trend continued, growth numbers for the first quarter would be affected negatively because consumer spending accounts for around 60 percent of the country’s gross domestic product (GDP).

Nedbank economist Isaac Matshego said if there was no improvement as the year progressed, it would be difficult to achieve the projected growth numbers for 2017.

Matshego attributes the poor numbers to a decline in the sales figures of retailers in the textile industry as well as those selling furniture.

“What we got was a decline, looking at the major categories, we can see that expenditure on the big ticket items, which are items that you pay for on a long-term basis like furniture, they declined and that is sort of depressing the overall numbers. The numbers tell a story of a consumer who has been under pressure for some time.”

Meanwhile business confidence is also low. The RMB/BER Business Confidence Index from the financial services group RMB Holdings Limited and the Bureau for Economic Research (BER) increased slightly by two point to 40 points. A number below 50 points means negative sentiment, while a number above 50 means positive sentiment.

RMB economist Issac Mhlanga says this means that business people are unhappy with the current prevailing economic environment.

“On the face of it this would suggest that things are getting better but it’s not necessarily so. Nonetheless an 11-point improvement is welcome. But we have to look at the fourth quarter numbers which declined by more than what was anticipated. If we look at the underlying data the situation is very visible,” he says.

“The growth in the volumes of sales has decreased; the growth of orders placed has also fallen. If we look at the rate of average price increases as well has fallen and this culminates in overall profitability being weak within that retail trade.”

The BCI has only been above the neutral 50 points mark on four occasions since 2008. Mahlanga says this is a pattern consistent with a struggling economy.

“It is also important to differentiate between durable and non-durable goods retailers. We see quite an improved confidence among non-durable goods retailers while confidence among durable goods retailers has deteriorated, which is consistent with the car dealers where confidence remains low so the consumer story is one which still remains under pressure which is consistent across many sectors.”

Source: NAM NEWS NETWORK