The fall of 1.7% compared with the corresponding month last year was the smallest since sales began to shrink last February. It was also more benign than the 2.5% drop predicted by local markets, after a revised 3.8% fall in December. But it is too early to point to a meaningful rebound in household consumption — the economy's main growth engine.
“Although there are now clear signs the economy is gaining traction, the growth outlook for retail … is still fragile,” Standard Bank economist Johan Botha said. “The reality is that the economic health of the consumer has not improved in recent months owing to the steep rate of job losses.”
SA shed 870000 jobs as the recession took its toll last year.
Wednesday's data kept alive a chance the Reserve Bank would cut interest rates at its monetary policy committee (MPC) meeting next week. Most analysts, however, believe it will hold its repo rate steady at 7%.
Statistics SA said it had brought forward the release of February inflation figures due on Wednesday, 24 March, by two hours, to “accommodate” the meeting.
That raised eyebrows, as the MPC's deliberations will last until early afternoon on Thursday.
The rise in the consumer price index (CPI), targeted for interest rates, is likely to have subsided back inside its 3%-6% target range last month after having breached it for two months in a row.
“Although continued improvement in retail sales might seem to have weakened the case for a rate cut, a move lower in CPI ... is likely to keep the debate alive,” Thebe Securities economist Monale Ratsoma said. Retail and wholesale sales comprise 12% of output, making it the economy's fourth biggest sector. They also flag trends in consumer spending, which drives about 60% of the economy.
Retail sales are likely to rebound in the coming months, after shrinking 5% last year.
But the pace of growth would not be robust, as household debt remained high, while wage hikes have been subdued.
The smaller retail sales fall in January stemmed from better pharmaceutical and medical goods sales, which jumped 6.1% year on year, and better textiles, clothing and footwear sales, which climbed 8%. Furniture and household appliances rose 2.2%.
“The better than expected sales in durable goods suggest that although the recovery in consumer spending has lagged the overall economy, it is no doubt under way,” said Elize Kruger, an economist at Qnomics.
The data reinforce the positive message sent by a rebound in new vehicle sales this year and a leap in consumer confidence during the first quarter. Hardware, paint and glass sales continued to slide, falling 16.8% year on year. The figures are adjusted for inflation.
Source: Business Day
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