It’s not sunshine and rainbows for South Africa’s retailers as they brace themselves for what could be some of their toughest months yet.
The Numbers Speak
June 2023 saw retail sales volumes dip by 0.9% year-on-year, according to Stats SA. A slight sigh of relief, perhaps, since the 1.6% drop in May (originally thought to be -1.4%) was even more severe.
Yet, FNB’s Senior Economist, Siphamandla Mkhwanazi, points out, “The outcome was worse than the Reuters consensus expectation of -0.2%, marking it the seventh straight month of dwindling sales volumes.” But here’s a silver lining: sales managed a 0.2% bounce back from May’s month-on-month 0.9% dip (initially gauged at -0.7%).
Why this uptick? Mkhwanazi attributes it to “the unexpected load-shedding break and nearly R1 fuel price dip in June.” But he follows it with a punch – “Even so, volumes shrank by 1% versus the prior quarter, suggesting the retail sector will pull down 2Q23’s GDP growth, in stark contrast to booming sectors like mining and manufacturing.”
The real zinger? “This highlights the tightrope consumers are walking, burdened by soaring debt, living expenses, and a sinking sentiment.”
Breaking It Down
Stats SA’s Retail Rundown:
- Feeling the Pinch:
- General dealers: -2.7% YoY
- Hardware material: -4.4% YoY
- Other retailers: -1.6% YoY
- Household furniture: -1.5% YoY
- Pharmaceutical retailers: -1.4% YoY
- Bucking the Trend:
- Clothing and footwear: +5.8% YoY
- Food and beverages: +1.0% YoY
What’s on the Horizon?
Mkhwanazi sheds light on some consumer trends. “Recent credit data reveals consumers are still piling on consumption credit, albeit at a steadying rate.” He continues, “National Credit Regulator figures also show a surge in store and credit card issuance in non-bank sectors, both consumption-driven.”
But, there’s a twist in the tale. FNB projects a tightening grip on lending standards as past interest rate moves seep in, cramping shopping fervor. Mkhwanazi sums it up, indicating the upcoming storm, “Factor in sinking consumer confidence, and it paints a picture of stunted growth in household spending.”