Stats SA have released the retail sales data for March 2011. According to this latest survey, retail sales rose by a modest 0.3%m/m in real terms during March, seasonally adjusted. On an annual basis, retail sales are still up a relatively healthy 5.1%y/y, but this was below what most analysts had expected, which was a growth of 5.7%y/y, and also well off the recent high of over 8%y/y growth recorded in November/December 2010. Overall, while retail spending remains reasonably elevated, is likely to come under increasing pressure in 2011/2012, unless there is a meaningful increase in employment (see discussion below).
In the three months to March 2011, retail sales were up a solid 1.7%q/q, seasonally adjusted (but not annualised).
Most categories of consumer spending appear solid, with sales of furniture, appliances and cosmetics/pharmaceutical goods, especially buoyant. In addition, sales of hardware, paint and glass have made a welcome recovery in recent months, albeit off a depressed based. In contrast, sales of food, beverages and tobacco have slowed appreciably, declining year-on-year in the first quarter of 2011.
Looking forward, SA consumer activity is likely to face increasing strain. This is due to a range of factors that are set to deteriorate, including the likelihood that wage increases will be lower in 2011 than in 2010, inflation is set to move higher in 2011/12 (due to rising fuel and food costs), the next move in interest rates will be up (possibly before the end of 2011), access to credit remains somewhat constraint (still no real growth in credit card debt), administered prices/taxes are set to rise further (eg electricity, medical aid, education, fuel levy, toll-roads? etc) and job creation remains sluggish. These factors have possibly already started to be reflected in slightly weaker consumer confidence readings (see chart attached). Ultimately consumer activity will lack absolute vibrancy in 2011/2012 without a meaningful increase in employment.
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