SA Retail Sales September 2010

Stats SA have released the retail sales data for September 2010. According to this latest survey, retail sales rose by an encouraging 0.4%m/m in real terms, seasonally adjusted. On an annual basis retail sales are up an impressive 6.1%y/y, which is higher than most analysts had expected. This is the ninth consecutive month in which retail sales have been positive on an annual basis.

In the three months to September 2010, retail sales were up 1.1%q/q, seasonally adjusted (but not annualised), highlighting that the SA consumer spending remains relatively buoyant, after an impressive recovery in the early part of the year. Furthermore, most categories of consumer spending appear solid, with only hardware, paint and glass sales detracting from the overall performance during the past three months.

Looking back over the past few months, retail spending was certainly boosted by the Soccer World Cup, especially sales of TVs and electronic appliances, as well as clothing. Following the Soccer World Cup (August) 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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