RETAIL sales in South Africa increased by 2% year-on-year in July after rising by 4.1% in June, Statistics SA said yesterday.
The July retail sales print marked the fifth consecutive month of increases, with economic activity now expected to ramp up towards the year-end festive season as interest rates decline and workers cash in savings from the Two-Pot retirement system.
Analysts had predicted an increase of 2.8% year-on-year ahead of the release.
Stats SA’s deputy director for distributive trade statistics, Raquel Floris, said the general dealers retail group, which includes supermarkets, was the largest positive contributor to the print, rising by 4.4% year-on-year.
“Other retail groups that recorded positive a month include pharmaceuticals, medical goods and cosmetics, household goods, food and beverages and textiles and clothing,” Floris said.
“On the downside, retailers specialising in hardware, paint and glass recorded a second consecutive month of decline, shrinking by 6.3% year-on-year. The miscellaneous group referred to as all other retailers also registered a weaker month.”
On a month-to-month basis, Stats SA said seasonally adjusted retail trade sales decreased marginally by 0.2% in July compared with June, following a 1.6% month-to-month rise in June.
Retail trade sales increased by 2.4% in the three months ended July 2024 compared with the three months ended July 2023.
Investec economist Lara Hodes said the increase in retail sales was largely broad-based, with five of the seven categories included in the retail basket rising year on year.
“The exceptions were the hardware paint and glass segment which slid by -6.7% y/y and the “catchall” category, all other retailers which contracted by -2.7% y/y. Together these groupings detracted -0.8 of a percentage point from the headline reading, preventing a larger y/y lift.“
Hodes further added, “The largest category in the retail index, the general dealers’ grouping, which constitutes over 40%, was primarily responsible for July’s 2.0% y/y lift, specifically sales in this segment of the market grew by 4.4%, adding 1.8 percentage points to the topline reading. Falling rates of inflation have been key to lifting real incomes. According to BankservAfrica, salaries adjusted for inflation tracked higher to R14 440 in July 2024, showing a 0.9% year-on-year growth.”
Hodes said that constrained consumers, especially the heavily indebted, will benefit from start of the SARB’s monetary easing cycle which is expected to be announced later today.
Consumer confidence improved further in the third quarter (to the highest level since the first half of 2019), while retailer confidence lifted “from its long-term average of 39 index points to an above average 45 index points in the third quarter”, according to the BER.
“An increase in political certainty following the formation of the Government of National Unity and a more favourable electricity supply environment have aided sentiment. The release of retirement savings under the two-pot retirement system will also support HCE (Household Consumption Expenditure) growth as it adds to consumer income but is also likely to be used to reduce debt,” Hodes said.