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Annual spree is on track

Total till takings in South Africa this Christmas are bound to crack the R60-billion barrier, a milestone narrowly missed last year, according to Statistics South Africa's total retail sales at current prices.

Once inflation is taken into account, however, beating 2008's peak of nearly R56-billion in constant 2008 rands will be a challenge.

The consensus among economists is this December won't beat 2008's record after inflation is factored in. Reasons include stubbornly high unemployment and debt levels. Factoring in inflation, last Christmas's sales were back down to 2006 levels. Whether this year's three interest rate cuts - which have taken the prime rate down from 10.5% a year ago to 9% now - will see retailers showing real growth again will only be known in two months' time once Stats SA publishes December's official figures.

Retailers are slightly more optimistic than economists, but most declined to speculate on whether this Christmas would set a new record.

Marked increase in sales

Kevin Korb, Pick n Pay's commercial director, said: "There has been a dramatic improvement in sales since the start of the school holidays which started on December 10. All indications are that we are going to have a reasonably good Christmas."

Consumer cyclicals are predictably big winners from interest rate cuts. Sales of household furniture, appliances and equipment were up by more than 22% in October from the same month the previous year.

Korb said: "In our audiovisual department, flat-screen television set sales have been very good as we have witnessed a dramatic increase in sales compared to previous years."

Another category in which Pick n Pay has noted a sizeable jump this year is liquor sales.

Online spending

Online retailer is upbeat this will be its best Christmas ever, forecasting a 25% jump in sales over last December. CEO Gary Novitzkas said figures "are in line with a research report recently released by Verdict Research, which forecasts that Christmas 2010 in the UK will be the best for retailers since 2007, and that online will take the lion's share.

"More than half of the respondents to the Festive Season Shopping Survey plan on spending up to 10% of their monthly earnings on gifts, while a third of the respondents plan on spending up to a quarter of their monthly wage," Novitzkas said.

Best and worst months

Retail statistics follow a more predictable annual pattern than most economic data: February is almost always the worst month, understandably since it has fewer days than other months. Nevertheless, every few years, January undercuts it as the annual nadir in retail takings.

While the worst month can be either January or February, December has no competition for best month: sales spike sharply thanks to the summer holidays and 13th cheques, often jumping 60% higher than the February low.

Hints about how big the December wave will be can be gleaned from the October and November swell.

Stats SA reported October's retail data on 8 December. Total sales came in at R47-billion at current prices, auguring well for the year and setting a new record, since October's retail sales were slightly higher than October 2008 after adjusting for inflation.

Most retailers have already enjoyed a bumper year thanks to the Fifa World Cup pushing July's total sales to over R46-billion, making this year look certain to beat 2008's overall sales figure in constant prices.

Source: Sunday Times


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