April holidays choke retail sales

Retail sales for March saw a 5.3% year-on-year decline compared to the 4.4% shrinking in February.

Despite recent aggressive interest rates cuts (400 basis points so far this year) by the Reserve Bank, economists expect the retail sector to remain under severe pressure.

Richard Downing, head economist at the South African Chamber of Commerce and Industry, said he expected further contraction as a result of the high number of public holidays during April.

“Our trade conditions survey showed April to be a negative month and much lower than March,” he said. “Durable goods suffered the most, especially since household credit was not increasing at a rate even close to inflation.

“Petrol prices have been on the increase, eating into people's disposable income, and inflation is already 8.5%, largely made up of food inflation.”

Fanie Joubert, senior economist at the Efficient Group, expected retail sales to deteriorate further to 5.8%. He said: “I don't think it was so much a function of the holidays because people still went to the shops, and retailers stayed open for more hours in response to the difficult economic climate.

“The main cause of the decline of the retail sector was the decline in household disposable income due to our high interest rates over the past several years. While there have been some cuts, it'll probably take another year before we see an impact on the figures.”

Tony Twine, director at Econometrix, also agreed that holidays livened up retailers' activity, but added: “Other indicators in April were collectively so bad that I don't expect any improvement from March.”

Source: The Times

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