ECONOMIC WEEK AHEAD: Inflation may slow retail sales
Retail sales are projected to contribute positively to third-quarter economic growth despite a slight moderation in September as the spotlight falls on consumption this week.
The September reading, which Statistics SA will publish on Wednesday, is expected to have moderated from robust growth in August as several factors including hefty fuel price increases, have almost negated the boost from the Reserve Bank’s 25 basis point interest rate cut in July.
NKC African Economics senior economist Elize Kruger forecast a slowdown to 5.4% year on year for retail trade sales in September. "Hefty fuel price increases should have strained trade sales during the month," Kruger said. Petrol rose by 67c/l and diesel by 44c/l .
BNP Paribas economist Jeffrey Schultz, who has projected 4.6% year-on-year growth for September and 1.1% growth between September and August, attributed the possible slippage in September to "higher inflation and slightly softer household credit growth".
"We should expect a slowdown in supermarket sales growth to be the main driver behind the softer sales performance in September."
But Schultz said a combination of still low domestic inflation and some remnants of consumer confidence following the July interest cut were likely to have helped the retail sector grow a cumulative 5% during the third quarter of 2017. This should bode well for "another positive quarterly contribution to third-quarter GDP".
First National Bank senior economist Mamello Matikinca said ahead of Black Friday discounts on November 24 that "aggressive product discounts should continue to provide momentum to the consumption sector into the new year".
But wholesale trade growth, which will be published on Thursday, had been struggling and contracting for the past five months. "We would anticipate that September wholesale trade sales will register another monthly contraction," she said.
The prospects of more rate cuts had dimmed and a further reprieve in debt repayments seemed unlikely, Novare Actuaries and Consultants economist strategist Tumisho Grater said.
On Tuesday, TransUnion will publish its third-quarter consumer credit index — an indicator of macroeconomic events and growth cycles for sectors affected by consumer finances and credit behaviour.
In the second quarter, consumer credit health continued to improve.
On Wednesday, the South African Chamber of Commerce Trade Conditions Survey for October will be released.
On Thursday, Statistics SA will publish data on civil cases for debt during September. A representative for the Debt Counsellors Association of SA said: "On the debt review side, there has been no marked improvement in the consumers’ ability to pay the monthly debt review payment."
Also on Thursday, Statistics SA will publish selected building statistics of the private sector as reported by local government institutions in September. Schultz said construction business confidence improved modestly in the Bureau of Economic Research’s third-quarter survey. However, the index remained at 44. A reading below the neutral mark of 50 indicates possible contraction of business activity.