Retail sales remain under pressure despite slight three-month lift

Notwithstanding a dip in month-on-month, seasonally adjusted retail trade sales in May, purchases from retailers increased by 0.6% for the three months to end-May when compared with the previous three months, according to Stats SA.

This largely resulted from a 2.9% increase in sales by general dealers such as supermarkets. April and May were the first months to see a prolonged halt in load-shedding after more than 18 months of severe power disruptions.

The now almost four-month-long suspension of load-shedding has positively influenced companies’ ability to pay better salary increases in 2024 which, in turn, has started to bring some relief for household budgets in SA that have been under “immense pressure” from rising inflation and high interest rates over the last two years, said BankservAfrica in its May Take-home pay index.

In real terms, salaries adjusted for inflation were up 4.5% in May up on year-ago levels, BanservAfrica said.

Stats SA said on Wednesday, in the release of retail trade sales data for May that purchases from retailers increased by 0.8% year on year in May. The result was marginally better than the Bloomberg consensus projections of a 0.6% increase and followed respective increases of 2.3% and 0.7% in March and April.

“The improvement, albeit modest, was broad-based with all categories in the retail basket rising year on year, except the textiles, clothing, footwear and leather goods category,” said Investec Bank economist Lara Hodes.

“An improvement in electricity supply has benefited retailers, while inflation is on a downward trend, which has supported real incomes of consumers,” she added.

Contributions to the year-on-year increase in May came from a 1.7% increase in purchases from general dealers which added 0.7 percentage points to the overall reading, and a 4.4% increase from specialised retailers in goods such as food, beverages and tobacco, which added 0.3 percentage points. Though it represents a smaller share of the retail basket, furniture and appliance sales — up by 6.2% — also contributed 0.3 percentage points to the May increase.

However, month-on-month increases of 1% and 0.5% in March and April were followed by a 0.7% decrease in May.

This showed that consumers were still having to tighten their belts, said Jee-A van der Linde, senior economist at Oxford Economics.

“Favourable base effects meant that the annual figure was positive, but overall consumer demand remains soft,” said Van der Linde.

Demand conditions, he said, were not expected to improve materially in the near term amid sustained high interest rates and ongoing supply-side constraints.

“That said, consumers were slightly less pessimistic in the second quarter of 2024 relative to the previous quarter,” said Van der Linde.

The SA Reserve Bank’s monetary policy committee will announce its latest interest rate decision on Thursday and while some economists believe that there is an outside chance that the bank could cut interest rates this week, market consensus expects it will hold steady yet again, at 8.25%.

Hodes and Van der Linde said they anticipated the interest rate-cutting cycle to start in November at the earliest.

erasmusd@businesslive.co.za