Shopping in South Africa rebounded as retail sector recorded a notable uptick in sales during August, reflecting a gradual positive shift in consumer behaviour and market conditions.
Data released by Statistics South Africa (StatsSA) yesterday revealed a year-on-year increase of 3.2% in retail sales following a downwardly revised 1.7% increase in July.
This marked the sixth consecutive month of growth in retail activity, and at a robust pace as six of the seven retail groups recorded a positive month.
StatsSA said the most significant contributor to this increase was the general dealers category, which saw a robust rise of 4.6%. This upswing was notably supported by food and beverages, which reported a growth of 5.4%.
Siphamandla Mkhwanazi, FNB senior economist, highlighted that this improvement surpassed market expectations, previously projected at a 2.1% increase.
Though Mkhwanazi said the anaemic shopping activity at hardware shops persisted, with volumes sliding by 4.5% from –5.2% in the previous month, there were improvements in sales growth among hardware retailers, albeit off an extremely low base, which could signal that hardware sales may be bottoming.
“Year-to-date, retail sales have increased by 1.3% compared to the same period last year, indicating a gradual improvement in consumer spending. In the short term, the introduction of the two-pot retirement system could provide a temporary relief to financially strained consumers, potentially boosting shopping activity,” Mkhwanazi said.
“Despite these positive developments, the broader consumer environment remains challenging. High unemployment rates and restrictive credit conditions continue to limit consumer spending power.”
On a monthly basis, seasonally adjusted retail trade sales showed a modest increase of 0.5% in August, following a slight decline of 0.2% in July.
This shift could suggest a stabilising trend in consumer spending, particularly as the economy navigates the impacts of previous inflationary pressures.
StatsSA said that in the three-month ending in August, retail sales increased by 3.0% compared to the same period last year, with general dealers and retailers in textiles, clothing, footwear, and leather goods standing out as significant contributors.
According to analysts, the recent formation of the Government of National Unity and improved electricity supply has enhanced sentiment among both retailers and consumers and led to an optimistic expectation of improved business conditions.
Furthermore, upcoming enhancements to the retirement savings landscape, particularly the Two-Pot retirement system, has positioned consumers to benefit from increased household consumption expenditure, potentially invigorating shopping activity.
Standard Bank economist, Shireen Darmalingam said the improved trend in real retail sales growth, as well as the recovery in the consumer confidence index, were encouraging signs that the long-expected improvement in the second half of this year was underway.
“This consumption recovery has thus far largely been underpinned by easing inflation. Relatively steady wage settlements have also boosted consumers’ real spending power notably. We continue to expect consumers to benefit from inflation and interest rate relief in the latter half of this year,” she said.
“The implementation of the Two-Pot retirement system at the beginning of September will likely support retail spending in September, although a portion of the withdrawal of savings could also be used to service debt. We expect the SA Reserve Bank to continue cutting rates and expect another 25 basis point rate cut at the November meeting, with further rate cuts pencilled in for the first quarter of 2025. This will likely support consumer spending in the coming months.”
BUSINESS REPORT