Standard Bank Research Team
Standard Bank
General dealers rise 3.4%y/y
Retail sales growth slowed to 2.1%y/y in August from 2.4% in July (fig.1), in part due to base effects of a 1.2% m/m (seasonally adjusted) increase in August 2013 (fig.2). The results nevertheless came in above the Bloomberg consensus forecast of 1.8%y/y. On a seasonally adjusted basis, retail sales grew 0.6% m/m in August compared to 1.2%m/m in July. YTD retail sales growth remains low in 2014 compared to 2013 (fig.7).
Y/Y growth of durable goods and non-durable goods sales accelerated in August over July, whereas that of semi-durable goods slowed down (fig.3):
Using furniture and appliances plus hardware as a proxy for durable goods, y/y growth of durable goods sales rose to 2.9% in August from 0.9% in July. Retailers in hardware paint and glass increased to 4.6% from 1.1%, contributing 0.4 ppts to overall retail sales growth (fig.4). Growth of furniture and appliances meanwhile slowed to 0.3% in August from 0.7% in July.
We have used general dealers, food and pharmaceuticals as a proxy for non-durable goods. Growth here sped up to 2.4% y/y in August from 1.7% in July. General dealer sales growth accelerated to 3.4% from 2.4%, contributing 1.4 ppts to total retail sales growth (fig.4). Pharmaceutical sales growth was constant at 0.8%, while the contraction in food sales deepened to -1.4% from -0.6%.
Using the textiles and clothing plus all other retailer segments as a proxy for semi-durable goods sales, growth of semi-durable sales slowed to 1.2% y/y in August from 4.3% in July. Textiles and clothing sales growth decelerated sharply to 0.2% from 4.5%; other retailer sales growth dipped to 3.1% from 3.8%.
Growth in retail sales will likely be hindered in the period ahead by a sustained deceleration in household disposable incomes, elevated inflation, low consumer confidence, slowing growth in household credit extension, still elevated household debt levels (at least compared with long-term averages), as well as higher interest rates. We stick with our view that economic growth will continue to underperform against consensus and official expectations, to a large extent because domestic demand is likely to undershoot. Slowing consumer demand growth to our minds speaks to a SARB that, while prepared with hike rates to defend its inflation fighting credentials, will stay reluctant to tighten because of weak growth. We believe that the SARB is unlikely to tighten monetary policy by as much as the market expects over the next 12 months.
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