Jason Muscat. Picture: SUPPLIED
Jason Muscat. Picture: SUPPLIED

Retail sales softened slightly in October as consumers held back in anticipation of Black Friday bargains in November.

But the sector is still poised for growth as inflation eases.

Retail trade sales increased by 3.2% year on year in October 2017 (R82.2bn) after a significant 5.4% year-on-year increase in September (R82.3bn).

In recent years, Black Friday had become an important factor in determining the performance of the sector in the final quarter of the year, said Stanlib chief economist Kevin Lings.

"This year will be no exception," he said.

In 2016, Black Friday sales were followed by a slump in December retail sales since many people had brought forward their typical end-of-year purchases, said Lings.

"Hopefully, retailers have been able to achieve a more consistent outcome during this end-of-year retail season."

"We ascribe the slower growth rate to consumers having deferred some purchases in anticipation of large Black Friday savings in November," said FNB’s senior economic analyst, Jason Muscat.

Despite subdued growth in October, Muscat expected a strong recovery in November and December on the back of Black Friday sales and festive season shopping.

Overall, the benign inflation backdrop, steady interest rates and above-inflationary wage increases had boosted retail sales, he said.

Inflation has remained comfortably within the target band of 3%-6% in recent months. The annual consumer price index experienced a marginal decrease of 0.2 of a percentage point to 4.6% year on year in November compared with 4.8% year on year in October.

Low consumer inflation boosted the purchasing power of households and provided some comfort to consumers, said Capital Economics economist John Ashbourne.

Even with the more favourable inflation trajectory, consumers were unlikely to find more relief in interest rate cuts.

While underlying economic activity remained weak and confidence was still fragile, interest rate cuts would be hindered by political and policy uncertainties facing the eco-nomy, said Nedbank economist Johannes Khosa.

The combination of higher international oil prices, a potential hefty electricity tariff hike in 2018 and the risk of further rand depreciation posed too high a risk on the otherwise favourable outlook, said NKC economist Elize Kruger.

In November, the Reserve Bank warned at the monetary policy committee meeting that according to its quarterly projection model, there could be three interest rate increases of 25 basis points each by the end of 2019.

In July, favourable inflation trends in consumer and production inflation, coupled with the weak economy, resulted in the Bank cutting interest rates by 25 basis points.


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