Retail Sales: September 08
| Econometrix | November 2008 | Ecobrief extract |
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Retail Sales: September 08 |
| GROWTH IN RETAIL SALES REMAINS WEAK
IN SEPTEMBER, BUT AT LEAST DOES NOT DETERIORATE FURTHER Y-o-y growth in retail sales at constant prices improved marginally, to -5.0% in September, from -5.6% in August. This outcome was dead in line with our forecast (see Friday's Ecopreview). A weak outcome had been expected since there had been little to improve the economic environment for the retail market. Interest rates remained high in the face of high levels of household debt and there was a deterioration in the medium to longer term inflation outlook as a result of the Rand's steep depreciation which commenced in earnest during the month. However, one might at least feel marginally reassured by the fact that the September retail outcome was no worse than expected despite the onset of global financial turmoil. This might have been partly due to the fact that inflation began declining. This is reflected in the fact that the y-o-y inflation rate for the retail industry, measured crudely by the difference between growth at current prices and growth at constant prices, declined for the first time in 13 months, to 16.1% in September, from a 16.7% peak in August. One plausible contributor towards the stabilisation in the growth of retail sales, one suspects, was a fall in food inflation on the back of a steep decline in agricultural prices in recent months linked to the sharp fall in global commodity prices. It seems no coincidence that growth in retail sales amongst general dealers and dealers in food, beverages and tobacco, accelerated during September. In contrast, growth in builders merchants' sales slumped on the back of declining residential building activity due to high interest rates. However, the biggest change occurred in respect of growth in sales amongst dealers in textiles and clothing. Until August such sales had held up remarkably well, but suffered severely in September. |
It is encouraging to note the marginal resilience of retail sales growth in
the face of declining inflation. The latter is set to fall sharply further over the next
six months in response to the steep decline in international commodity prices. This
decline in inflation in turn is likely to gather momentum just as most salary earners
secure double-digit wage increases on the back of the high inflation rate of the past
year. This ought to prevent the growth in consumer spending from gathering still more
negative momentum in coming months and could mark the start of a mild recovery from early
next year onwards. From a monetary policy perspective, the ongoing weakness in consumer spending represents a potent factor preventing further interest rate hikes despite sharp currency depreciation. At the same time, there has not been any dramatic further deterioration to warrant panic action to reduce interest rates. |
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