Retail sales have held up relatively well this year in the face of a contraction in manufacturing, which accounts for about 15% of economic output. This strikes a rare positive note for the economy's outlook, as consumer spending is SA's main engine of growth.
Consensus forecasts from I-Net Bridge suggest that growth in retail sales picked up to 4.6% in August compared to the same month last year, after rising by 4.2% in July.
But the range of forecasts is wide, with some economists predicting growth will slow sharply, to as little as 2.4% year on year.
"With all the cost increases we have seen and with the labour market as fragile as it is, it won't be a surprise if we get a weaker number this week," said Meganomics economist Colen Garrow. "That means we have more generic weakness in the economy."
He believes retail sales growth moderated to 2.6% in August.
Efficient Research economist Merina Willemse forecasts a modest pick-up in retail sales growth, to 4.2% year on year. "Confidence is low now but I don't think it has filtered through into the August numbers yet. If you look at domestic demand in terms of imports, it's still strong," she said.
According to a survey from the Bureau for Economic Research, confidence in the retail sector improved to 46 points in the third quarter from 39 points in the second. The reading indicates that 46% of retailers are satisfied with current business conditions.
"This bodes well for retail sales in the third quarter," Standard Bank said in a research note. It sees retail sales growth accelerating strongly to 5.9% in August.
The sector faced mixed fortunes, with softening income growth, stuttering employment and higher prices offsetting low interest rates and strong credit growth, Standard Bank said.
During the second quarter, growth in wholesale, retail and motor trade slowed to 2.8% from 3% in the first, according to Statistics SA. The sector, which includes catering and accommodation, accounts for 12.5% of output.
Figures from the Reserve Bank tell a similar story, with household consumption slowing to 2.9% in the second quarter from 3.1% in the first. Growth in disposable income reflects the trend, slowing to 3% from 3.3% in the same period.
Spending and borrowing may have received a modest boost in August after the Bank's surprise decision to trim its key repo rate by half a percentage point to 5% the previous month.
That took prime lending rates set by commercial banks to 8.5%.
But an increase in the debt burden of households during the second quarter should curb appetite for household borrowing, Standard Bank said.
Household debt rose to 76.3% of disposable income from 75.6% in the first quarter. During the same period, the ratio of credit-active consumers with impaired credit records rose to 47% from 46.4%.
"Consumers are faced with head winds and credit health is deteriorating," Standard Bank said.
Source: Business Day
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