Stats SA have released the retail sales data for October 2010. According to this latest survey, retail sales rose by an encouraging 0.7%m/m in real terms, seasonally adjusted. Retail sales are up an impressive 6.1%y/y, in line with most analysts’ expectations. This is the tenth consecutive month in which retail sales have been positive on an annual basis and follows impressive growth of 6.0%y/y in September 2010.
In the three months to October 2010, retail sales were up a modest 0.1%q/q, seasonally adjusted (but not annualised). This highlights the relatively weak performance in August 2010 following the World Soccer Cup, as well as the high base sales established in May and June associated with the World Cup.
Most categories of consumer spending appear solid, with sales of furniture and appliances especially impressive. In contrast, sales of hardware, paint and glass remain relatively subdued, but past its worst level.
Looking back over the past few months, retail spending was certainly boosted by the World Soccer Cup, especially sales of TVs and electronic appliances, as well as clothing. In 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 did not represent a general slump in retail activity. Rather, the SA consumer is in far better shape now 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 solid pace into 2011, but will ultimately lack absolute vibrancy without an increase in employment.
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