SOUTH Africa’s retail trade sector is expected to detract from overall gross domestic product (GDP) in the first quarter of 2024 due to muted consumer spending after activity slowed on a quarterly basis.
Statistics South Africa (Stats SA) said yesterday that seasonally adjusted retail trade sales decreased by 0.9% in the first quarter of 2024 compared with the fourth quarter of 2023.
“Three of the seven retail groups reported negative growth rates over this period, with textiles and clothing the biggest drag on growth,” said Raquel Floris, Stats SA’s deputy director for distributive trade statistics.
However, retail sales expanded by 2.3% year-on-year in March, following a revised decline of 0.7% in February, likely boosted by holiday-related consumer shopping activity.
Stats SA said four out of seven categories recorded an increase in annual volumes.
The general dealer category was largely responsible for the expansion, at 6.4% year-on-year, supported by clothing and footwear sales, which grew by 0.9%.
Food and beverages as well as household furniture retail saw increases of 1.6% and 3.2%, respectively.
By contrast, demand for hardware material continued to slide, declining by 5.3% and marking the 11th consecutive month of decline in hardware volume sales as consumers continue to cut back on home improvements in favour of basic necessities.
Volumes also declined in pharmaceuticals as well as other retailers.
Investec economist Lara Hodes said consumer confidence was still subdued.
“Indeed, as consumers continue to grapple with the high cost of living, expenditure on necessities is prioritised, while big-ticket purchases tend to be reduced or postponed.
“Moreover, the SA Reserve Bank is now likely to start cutting rates later than anticipated, with elevated interest rates weighing heavily on the indebted. The official unemployment reading ticked up in the first quarter to 32.9%. Accordingly, we expect household consumption expenditure, which makes up a significant portion of GDP, to be lacklustre in the short term.”
This retail print followed two consecutive months of contraction in retail activity, and was better than market expectations of 0.4% increase.
On a seasonally adjusted monthly basis, retail sales went up by 1.4% in March, after an upwardly revised 1% increase in February and a 3.3% decline in January.
FNB senior economist Siphamandla Mkhwanazi said retail volumes continued to reflect a subdued consumer demand environment, weighed on by sticky inflation, high interest rates and depressed consumer confidence.
“In addition, the prevailing tight lending standards, in the face of elevated debt service costs and credit defaults, should keep credit growth relatively contained, further limiting consumers’ ability to fund purchases.
“That said, there are some faint glimmers of hope in the medium to long term, emanating from a continued slowdown in inflation and modest job gains. As such, we expect household consumption expenditure to lift from 0.6% in 2023 to 1.2% in 2024 and remain contained at around 1.5% in the outer years.”
BUSINESS REPORT