Retail sales growth likely to have slowed

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Retail trade sales will have increased 2.8% in June compared with 2012, and from 6.2% year-onyear growth in May, Statistics SA figures are expected to show on Wednesday. The 2.8% forecast is a median consensus of nine economists surveyed by BDlive. The forecasts ranged from 1.1% to 4.5%. Most economists also see retail sales falling 0.2% on the month.

Absa Capital economists said the previous retail trade sales number of 6.2% year on year was a strong positive surprise, but that since then a number of additional data had painted a mixed picture of retail activity by consumers.

"Vehicle sales data for July and consumer confidence data for Q2 (second quarter) released last week has also came in stronger than expected, suggesting that household spending may be proving to be more resilient than we initially thought," Absa economist Miyelani Maluleke says.

The FNB/Bureau for Economic Research (BER) consumer confidence index rose to 1 in the second quarter from a nine-year low of -7 in the quarter before.

Improving consumer confidence bodes well for future spending by households, as it suggests some increased willingness to spend. But robust spending by households is unlikely, given elevated debt levels and rising fuel and other transport costs, among other challenges.

"Despite having recently improved, prevailing consumer sentiment does not suggest that retail expenditure will shoot the lights out," Standard Bank research strategist Sibusiso Gumbi wrote in a note.

Stricter lending criteria by financial institutions have also being a stumbling block to higher levels of credit uptake by households. "June credit extension to households grew at the slowest pace since August last year, which is likely to have weighed on durable goods sales," Maluleke says.

Gumbi wrote while still buoyant at 17.6% year on year, the "conspicuous" slowdown in credit extended to households from 19% year on year in May suggested "credit fatigue" was creeping in.

FNB/BER noted at the time of the index release that a combination of a slowdown in real disposable income growth and a moderation in credit extension would likely continue to weigh on consumer confidence levels.

Of the economists surveyed for retail sales, Standard Bank was the least optimistic. The bank forecast retail sales growth to decelerate to 1.1% year on year in June.

"The key culprit for this slowdown is likely to come from base effects; June 2012 had recorded 9.0% year on year growth (and an equally notable 2.2% month on month seasonally adjusted) in real retail sales, the highest year on year print of 2012," Gumbi wrote.

Standard Bank expected the retailers of household furniture, appliances and equipment to have continued experiencing tough trading conditions while the retailers of textiles, clothing, footwear and leather goods will likely continue growing. The latest consumer confidence index shows consumers remain careful of spending on big ticket items.