Shoppers take advantage of Black Friday sales at the Rosebank Mall. Picture: FREDDY MAVUNDA
Shoppers take advantage of Black Friday sales at the Rosebank Mall. Picture: FREDDY MAVUNDA

Retail sales picked up more than expected in November thanks to Black Friday discounts, but analysts warned that the overall year-to-date sales could be shaping up for the worst performance in more than a decade.

Though Black Friday sales saw better than expected annual growth at 2.6%, the retail sector has been battered in the past year as a weak economy, unemployment and low income growth have put consumers under pressure.

According to Kevin Lings, chief economist at Stanlib, retail sales for 2019 as a whole are expected to achieve an average annual growth rate of about 1.4%, the lowest growth rate since the financial market crisis in 2009.

“Growth in retail spending is well below its historical average, highlighting the broad-based weakness in the SA economy, especially the lack of job creation in recent years,” Lings said in a note.

Retail sales accelerated in November, and registered growth of 2.6% on an annual basis. Business Day discussed the data with Nedbank's Reezwana Sumad, as well as whether the growth momentum can be sustained into 2020.

The figures preceded Thursday’s interest rate decision by the Reserve Bank.

Both growth and inflation have surprised on the downside in recent months, providing Bank  governor Lesetja Kganyago room to cut rates, argue some economists.

But he is largely expected to keep the repo rate at 6.5%, as SA looks to its February budget outcomes and the rating decision by Moody’s Investors Service.  

The retail sector struggled in 2019, with general retail stocks experiencing their toughest year since 1998. On Monday Massmart — the owner of Game and Makro — announced it would be closing underperforming Masscash and DionWired stores, cutting 1,500 jobs in the process.

Though the numbers look positive, the Black Friday effect meant “we need to exercise a little bit of caution”, said Sanisha Packirisamy, economist at Momentum Investments.    

According to Stats SA figures, the largest annual growth rate was recorded for retailers in food, beverages and tobacco in specialised stores, which saw growth of 6.2%.

Packirisamy said this suggested consumers were stocking up on necessities, rather than luxury goods, which “basically steals away spend from future months”.

December’s retail figures are likely to be “much softer”, she said, as load-shedding incidents began during the month, along with a spate of poor weather that could have kept people away from shopping.  

Consumer confidence for the fourth quarter of 2019 remained at -7, a two-year low, with the majority of consumers expecting SA’s economic prospects to deteriorate over the next 12 months, according to the latest FNB/BER Consumer Confidence Index.

The index is a measure of households’ confidence in the economy and sentiment regarding their financial position. The neutral mark for the index is considered to be +2.

November’s “encouraging” outcome notwithstanding, the year-to-date retail sales growth trajectory reinforced a muted demand environment, said Siphamandla Mkhwanazi, senior economist at FNB.

“This is reflected in the persistently low retail inflation readings, which remain below headline inflation levels,” he said, and demonstrated retailers’ “continued inability to pass on price increases amid intensified bargain hunting by consumers”.

The Bank is expected to “remain hawkish” on rates on Thursday due to the sovereign ratings outlook, said Packirisamy, though it could cut its inflation and economic growth estimates

According to the Bank’s modelling, it expects inflation to have averaged 4.2% in 2019 and reach 5.1% for 2020, while it forecasts growth of 0.5% for 2019 and 1.4% for 2020. 

But inflation has consistently surprised to the downside, she said, while load-shedding has weighed on growth expectations.

donnellyl@businesslive.co.za