INTEREST RATES
BRIAN KANTOR: Let repo rate be guided by the economy
There would be little reason to regard the rate of retail sales growth as representing a peak in the cycle
The volume of retail sales in SA has gained welcome momentum off a very weak base. By March real sales were up 4.8% compared to a year before. This growth in spending was stimulated by a sharp decline in retail inflation from early 2017. Retail inflation was 7.4% in March 2016 and declined steadily to 1.6% in March 2018. Retail sales actually contracted by 1.7% in December 2016. A year later growth was over 5% per annum. The real sales cycle was at a trough when the retail price cycle was at its peak in the fourth quarter of 2016. There would be little reason to regard the rate of retail sales growth as representing a peak in the cycle — were it not for a concern that retail price inflation may have reached a cyclical trough. The declining trend in retail and headline inflation since mid-2016 had much to do with the stronger rand. Another force acting particularly on food price inflation was the end of the drought of 2016. Inflation peaked after the dollar-rand exchange rate reached...
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