Stats SA have released the retail sales data for August 2011. According to this latest survey, retail sales rose by a respectable 0.7%m/m, in real terms, seasonally adjusted. On an annual basis retail sales recorded impressive growth of 7.1%y/y (real), up from 3.0%y/y in July. This was better than market expectations for a rise of 5.2%y/y, although the forecast is based on a small survey sample. In addition, the annual rate of change (7.1%y/y) is flattered by the relatively low base of activity recorded August 2010, which was the first full month of retail sales following the end of the 2010 Soccer World Cup.
In the past few months the SA retail sales data has been extremely erratic. This volatility reflects a combination of base effects, with annual comparisons distorted by the World Cup in 2010, as well as the timing of public holidays. Using a moving average of retail sales, the pattern is far clearer (see chart attached). This pattern suggests that the rate of growth in retail sales is losing some momentum, but that the slowdown is not dramatic or alarming.
Looking forward, SA consumer activity is likely to face increasing strain. This is due to a range of cost-push factors that are systematically eroding the household sector’s spending power. These include higher energy costs, transport costs, food costs, education fees, medical service costs and water costs. Households cannot avoid these increases, as they relate to necessities or essential goods, forcing consumers to either cut-back on non-essential purchases or take on additional debt. The rate of growth in consumer debt remains relatively subdued (see chart attached), including the use of credit cards, suggesting that the consumer is adopting a relatively conservative approach to the use of credit after a very difficult 2008/2009.
Ultimately, SA consumer activity will lack vibrancy in 2012 without a meaningful increase in employment.
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