Slow retail sales ‘to weigh on first quarter GDP’
As retail sales become the last piece in the GDP puzzle, industry analysts anticipate a weak outcome for the first quarter.
Value-added tax (VAT) absorption in retail sales seemed to have driven pre-emptive buying in April when retail trade sales recorded a 4.8% year-on-year increase. But some analysts expect this growth to plateau.
Investec chief economist Annabel Bishop said the sharp contractions in industrial production (manufacturing, mining and electricity) and retail sales in the first quarter of 2018 on a quarter-on-quarter adjusted annualised basis (the headline GDP measurement) indicated a weak outcome for first-quarter GDP growth.
On a quarter-on-quarter seasonally adjusted annualised basis — the method of calculating quarterly headline GDP growth — retail trade sales had fallen 5.2% in the first quarter of 2018, Bishop said.
She calculated that industrial production fell 6.9% and these two contractions indicated there was likely to be a weak outcome for first-quarter GDP growth, possibly even a contraction.
On Wednesday, Statistics SA reported that retail would contribute a 1.3% decline to first-quarter GDP, which it previously reported suffered a 1.7% subtraction from manufacturing sales and 2.5% subtraction from mining sales.
General dealers expanded 2.4% year on year, adding 1.1 percentage points. The biggest contribution came from clothing retailers, whose sales rose 10.6% year on year, contributing 1.6 percentage points to the headline number.
Sales of pharmaceutical, medical, cosmetic and toiletry products gained 7.9%.
Jason Muscat, First National Bank senior economic analyst, said the first-quarter trade data tended to be distorted because of Black Friday and festive season shopping.
Despite the strong performance in the first three months of 2018, the sector contracted — 1.3% quarter on quarter in the first quarter of 2018.
Muscat agreed with Bishop’s sentiments, saying “we maintain our forecast for a contraction of 1% quarter on quarter for the first quarter”.
The R1.21/litre petrol price hike in April and May would also limit consumer spending power and, as a result, retail sales growth would moderate.
Bryan Sun, MD of East and SA at Nielsen, who was speaking at the company’s 360 Consumer conference on Tuesday, said: “The South African consumer is not confident at the moment. There are concerns about job security and discretionary income, but we are seeing it improving. We are keeping an eye on that [VAT increase] and the sugar tax as well.
“It’s always interesting to see how people react in the basket, what they will change and what they will replace to make up for these shifts in the market.”