October retail slows ahead of festive season sales

Johannesburg – Consumers held back on purchases in October in anticipation of Black Friday sales, data from Statistics South Africa (Stats SA) suggested.

According to the data released on Wednesday, retail sales for October increased at an annual rate of 3.2%, compared to the 5.7% increase reported in September.

“We ascribe the slower growth rate to consumers having deferred some purchases in anticipation of large Black Friday savings in November,” explained FNB senior economic analyst Jason Muscat.

“We expect a good recovery in November and December on the back of Black Friday sales and Christmas buying,” he added. However, there may be a contraction in sales for the first quarter of 2018, given the distortion of numbers because of Black Friday, he explained.

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Lower inflation, steady interest rates and above inflation wage increases have helped boost retail sales. However, Muscat expects sales growth in 2018 to be negatively impacted by tax increases following the National Budget in 2018.

Investec economist Kamilla Kaplan also expects further tax increases to drag down sales. Future retail sales are likely to be impacted by consumption growth. This may be modest given the tax increases, high unemployment, and tightening of credit standards. “Moreover, depressed consumer confidence has also impacted consumers’ willingness to spend,” she said. 

Conditions in the retail sector are expected to deteriorate in the first quarter of 2018, according to the Bureau of Economic Research’s retail survey which showed retailer’s confidence levels remained low, she explained. 

Contributors to the sales growth in October were other retailers, which include book stores, jewellery outlets, sporting and second-hand goods, grew 15% and contributed 1.7 percentage points to sales growth. The other major contributor was retailers of textiles, clothing, footwear and leather goods which grew 5.5% and contributed 1 percentage point to growth.

Other retail categories which reported growth were food and beverage stores up 0.8%, pharmaceuticals which were up 5.7%, clothing up 5.5% and furniture stores up 5.4%.

The general dealers and hardware retailers were the only two retail categories which contracted, by -0.3% and -0.9% respectively.

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