Retail sales slow as wary consumers take cover

Retail sales rose more slowly than expected in October, official data showed yesterday, suggesting consumers may be wary of spending as the year draws to a close.

Growth in retail sales slowed to 7.4% compared to the same month last year, down from 7.7% in September and just below consensus forecasts for a 7.5% increase.

Significantly, September's rise was revised down to 7.7% from 8.3%, according to Statistics SA figures.

"The data is respectable, but not dramatically good," said Razia Khan, Standard Chartered's regional research head for Africa.

"There is nothing here to suggest consumers will not be hit by a deterioration in sentiment and activity should the overall economic backdrop change for the worse."

Retail sales are an important indicator for consumer spending, which is the economy's engine and was the main driver of SA's recovery from recession in 2009.

During the month itself, retail sales rose 0.6%, down from 1.5% in September. Views were mixed on the outlook for the sector, which together with wholesale and vehicle sales, catering and accommodation, is one of the economy's biggest. It grew 6.1% in the third quarter, outpacing all the other sectors.

Retail sales are likely to stay firm until the end of the year, but some analysts say consumers will be cautious, as rising inflation erodes disposable income.

Others say retail sales will continue to gather momentum in the months ahead.

The figures "leave us confident that consumers remain robust in SA, where we can likely expect another resilient quarter of growth for the sector," Absa Capital economist Jeffrey Schultz said.

"High levels of consumer and retail business confidence, and our expectation that interest rates will remain supportive for some time, continue to suggest that this side of the economy is likely to remain the driving force behind growth prospects in 2012."

A quarterly business confidence indicator compiled by the Bureau for Economic Research last month showed that the mood in the retail sector improved strongly in the fourth quarter of the year.

Retail confidence was the only component of the index which gave a reading above the neutral 50 mark, rising by eight points to 56.

Figures released earlier in the day showed that wholesale sales rose 8.9% in October compared with the same month last year.

A breakdown of the retail data shows that sales of hardware, paint and glass rocketed 16.6% in October against the previous October.

Sales of household furniture and appliances jumped 13,2% while sales of textiles, clothing and footwear rose 10.7%.

Source: Business Day