Rate of contraction for retail sales slows in June
But retail activity is still about 10% down from the levels before the pandemic struck, and is likely to return to pre-Covid-19 levels only in the first half of 2021
The contraction in retail sales persisted during June, though it showed a marked pull back from the record lows recorded in the preceding months under the worst of the national lockdown, figures from Stats SA showed on Wednesday.
Annual retails sales shrank 7.5% in June, when SA relaxed lockdown restrictions to level 3, allowing for more goods and services to be accessed.
This is off the record year-on-year declines in April and May, when retail sales collapsed by a revised 49.9% and 11.9% respectively.
Though retail sales managed growth of 6.4% on a month on month, seasonally adjusted basis during the second quarter of 2020, sales decreased by 23.5% compared with the first quarter, which is expected to add to the drag on growth.
“There is a recovery slowly unfolding after the initial decimation of the lockdown,” Stanlib chief economist Kevin Lings told Business Day.
But retail activity was still about 10% down from the levels that prevailed before the pandemic struck and it was only likely to return to pre-Covid-19 levels in the first half of 2021, he said.
“The rate of bounce back seen in the last two months won’t continue on,” Lings said.
“I think it’s going to take a while to regain the lost ground in the retail sector.”
The retail sales numbers come as both business and consumer confidence languishes at record lows. With the economy set to experience its worst recession since the Great Depression many firms are battling to stay open, while consumers are seeing either their jobs or their incomes cut.
The most recent consumer confidence survey from FNB and the Bureau for Economic Research showed that consumers have balked at buying large durable goods and are pessimistic about their finances in the face of growing unemployment and salary cuts.
Household consumption accounts for roughly two thirds of GDP growth
The sectors that recorded the largest annual declines were in all “other” retailers ; retailers in food, beverages and tobacco in specialised stores; and textiles, clothing, footwear and leather goods retailers, according to Stats SA.
Retailers of household furniture, appliances and equipment; as well as those of hardware, paint and glass, did show positive growth during June, recording growth of 13.4% and 5.5% respectively.
This suggested there was something of a “cushioning effect” from consumers who are spending more time at home, and may be saving on items like travel costs and mortgage repayments due to lower interest rates. These consumers may be spending the resulting increased “discretionary income” on home improvements and household appliances said Lings.
But this was unlikely to be enough to offset the overall strain on consumers more broadly due to job losses and income declines he said.
Other sectors of the economy are likely to take much longer to recover than the retail sector notably in areas such as fixed investment spending and manufacturing, Lings added.
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