Picture: JSE
Picture: JSE

Markets trading ahead of the JSE’s opening on Wednesday morning were flat as they digested the raised likelihood of a US interest rates increase after Tuesday’s release of retail sales data.

US retail sales beat expectations by growing 4.2% in July from the same month in 2016 — against the expected 3%. That raised the likelihood of the US Federal Reserve Bank increasing interest rates

The health of the South African retail industry will be in the spotlight on Wednesday with Italtile scheduled to release its results and Statistics SA its June retail sales report at 1pm.

The JSE’s retailers are likely to dominate next week’s business news with Shoprite scheduled to release results on Tuesday and Woolworths on Thursday.

A poll of economists done by Trading Economics found the consensus is that SA’s annual retail sales grew 2.1% in June, up from 1.7% in May.

Investec Bank economist Kamilla Kaplan said in her weekly economic forecast, e-mailed on Friday, that she expects June retail sales growth to be about 2.5%.

"Retail sector activity was positive in the first two months of the second quarter. In particular, the seasonally adjusted measure, which is used to determine GDP, signals that the sector will make a positive contribution to second-quarter GDP, after having detracted from the first quarter.

"Looking ahead, retail sector activity is likely to remain muted this year, in line with modest growth in household consumption expenditure that we project at 1% versus 0.8% in 2016," Kaplan said.

"Constraining factors to the growth in household consumption expenditure include persistently depressed consumer confidence, high unemployment and weak income growth.

"Decelerating inflation and the recent interest rate reduction, and possibility for a further cut, should provide some relief to households but tighter credit conditions as well as the prospects for further fiscal tightening will weigh on consumers’ ability to spend."

Italtile said on August 1 that it expected to report headline earnings per share (HEPS) for the year to end-June would decline slightly from the matching period’s 86.9c.

The tile and other home improvement hardware retailer said it expected the decline to be in the range of 2.8% to 0.7%.

"Towards the end of the first six months of the period the trading environment deteriorated markedly, featuring intensified economic pressure and sociopolitical uncertainty," Italtile said.

"Under these adverse conditions, consumers further curtailed discretionary spend on home improvements and renovations, while both public and private sectors suspended investment in the new build segment. The group’s performance for the period reflects this downturn, with notably stronger results reported for the first half when compared to the second half."

Italtile said it managed to grow sales by 4.3% to R6.21bn. Its basic earnings benefited from the windfall of the R37m sale of its Australian property company in December.

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