Shoppers in South Africa are expected to continue trekking slower and slower to shops as depressed household incomes plunged retail sales for the sixth month in a row in May.
This comes as Statistics South Africa (StatsSA) yesterday said retail sales volumes declined by 1.4% year-on-year in May, from a downwardly revised decline of 1.8% in the previous month.
The May print marked the sixth consecutive month of year-on-year declines in retail activity as a number of retailers continued to experience a significant negative impact primarily due to the prolonged power crisis.
StatsSA’s deputy director for distributive trade statistics, Raquel Floris, said five of the seven retailer groups registered decreases in May, with general dealers and hardware stores the largest negative contributors.
The hardware, paint and glass segment, moved back into contractionary territory in May after increasing for the first time in nearly two years in April.
“General dealers recorded a year-on-year decrease of 3.7% while retailers in hardware, paint and glass registered a decline of 8.7%.
“Other retailers who performed poorly in May include those specialising in food and beverages, pharmaceuticals and medical goods, and household furniture and appliances.
“The two retailer groups that recorded positive year-on-year growth were textiles and clothing, and the miscellaneous category referred to as ‘all other retailers’.
Textiles and clothing recorded its 12th consecutive month of year-on-year growth, expanding by 10.3%.”
On a monthly basis, seasonally adjusted retail trade sales plunged by 0.7% in May, reversing a 0.2% gain in April.
Seasonally adjusted retail trade sales decreased by 0.7% in the three months ended May compared with the previous three months, giving early indications that the retail industry will likely detract from the second quarter of 2023 gross domestic product (GDP) growth.
Year-to-date, volume sales were lower by 1.2% in May compared to the same period last year.
FNB senior economist Siphamandla Mkhwanazi said the relative outperformance by clothing retailers was consistent with the National Credit Regulator data that was showing a strong increase in the issuance of store cards.
Mkhwanazi said credit data suggested that consumers were still accumulating consumption credit at a relatively faster pace, though the trend has plateaued in the last few months.
However, Mkhwanazi said they expected that lending standards would tighten further, as the cumulative impact of past interest rate decisions filters through, suggesting less support for shopping activity.
“Furthermore, salary growth expectations have also moderated, in contrast to inflation and interest rate expectations,” Mkhwanazi said.
“These factors, combined with depressed consumer confidence, corroborate our view of subdued growth in household consumption expenditure.”
Indeed, household incomes remained severely depressed as confidence levels in the economy was at shockingly low levels, and continued to hamper economic recovery as well as salary adjustments and movements in the job market.
According to BankservAfrica, the average take-home pay tracked lower in May falling by 8.8% to “the lowest level on record” and remained below the level of a year ago.
Investec economist Lara Hodes said that despite the lift in the textiles, clothing, footwear and leather goods grouping, overall retailer sentiment remained highly subdued.
“The electricity supply situation continues to weigh heavily on costs, reducing profitability, while consumers remain financially constrained dealing with elevated living costs and high interest rates,” Hodes said.
“In the short-term we don’t anticipate a meaningful pick-up in household consumption expenditure, which makes up around two-thirds of GDP. Growth for this year is projected at just 0.2%.”
BUSINESS REPORT