In November 2010, retail sales were unchanged month-on-month, in real terms, seasonally adjusted, according to Statistics South Africa. Retail trade sales saw a year-on-year increase of 7.8%, which is above market expectations and is the eleventh consecutive month in which retail sales have been positive on an annual basis; following impressive growth of 6.5%y/y in October 2010 and 6.0%y/y in September 2010. The annual rate of change in retail spending is currently being flattered by the relatively low base in 2009.
In the three months to November 2010, retail sales were up an impressive 0.3%q/q, seasonally adjusted (but not annualised). This partly highlights the higher base of sales established during the World Cup, but also suggests that while consumer activity has clearly recovered relative to the disaster in 2008/2009, the current pace of the recovery is not all that robust. This would seem to highlight the current lack of employment growth, which is vital to sustain a vibrant consumer sector.
Most categories of consumer spending appear solid, with sales of furniture and appliances especially impressive. In contrast, sales of hardware, paint and glass remain subdued but past its worst level. It would also appear that the Christmas shopping period was encouraging, with many retailers reporting good trading conditions.
Looking back over the past few months, retail spending was certainly boosted by the Soccer World Cup, especially sales of electronic appliances (more especially TVs) as well as clothing. Following the Soccer World Cup (August 2010) it was reasonable to expect a slump in sales; certainly relative to the high base of activity that had been established over the preceding few months. But, importantly, the slowdown in August 2010 did not represent a general slump in retail activity. Rather, the SA consumer is in far better shape than a year ago. This includes rising incomes (in real terms because wages have increased at a faster pace than inflation), lower debt servicing costs (due to lower interest rates), less job losses (most of the job losses occurred in 2009), stable and relatively elevated confidence levels (especially among mid to upper income earners), slightly easier access to credit, an improvement in house prices (albeit modest) and a rise in wealth levels (mainly due to a higher equity market and hence a positive wealth effect). Importantly, this improvement appears to be reflected in the financial results of a number of local retailers.
The current range of consumer related economic data would suggest that consumer spending can continue to expand at a respectable pace in 2011 but at a level below the 7.8%y/y recorded in November 2010. Ultimately consumer activity will lack absolute vibrancy in 2011/2012 in the absence of an increase in employment.
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