Consumers in South Africa continued to feel the impact of elevated inflation and high interest rates in April as retail trade sales fell for the fifth month in a row as the adverse effects of the prolonged power crisis weighed on general dealers, food and beverages retailers.
Data from Statistics South Africa (StatsS A) yesterday showed that retail trade shrank by 1.6% year-on-year in April 2023, following a downwardly revised 1.5% fall in March.
This marked the fifth consecutive month of decline in retail activity and at the quickest pace since June 2022, and also higher compared with market estimates of a 1.4% decrease.
Stats SA said that five of the seven retail categories included in the index declined year-on-year.
Stats SA’s deputy director for distributive trade statistics, Raquel Floris, said the general dealers and retailers in food and non-alcoholic beverages were the biggest factors behind the decrease.
Floris said other retailers that performed poorly in April include those that specialise in pharmaceuticals and medical goods, household furniture and appliances, and merchants classified in the miscellaneous category referred to as all other retailers.
However, the hardware, paint and glass segment, which benefited significantly from the work-from-home mandate enforced during the height of the Covid-19 pandemic, grew for the first time in nearly two years.
“General dealers, which includes supermarkets, recorded a year-on-year decline of 2.8% in sales. Retailers specialising in food and beverages recorded a 6.2% slump over the same period,” Floris said.
“After 21 consecutive months of year-on-year decline, hardware, paint and glass turned positive in April, growing by 3.1%. Clothing and textiles also recorded a 3.1% year-on-year increase.”
On a monthly basis, retail sales rose by 0.4% in April compared with March, after two successive months of declines of 0.6% in March and 0.4% in February.
Investec economist Lara Hodes said retailer sentiment remained highly subdued, with confidence dropping 14 points to 20 in the second quarter of the 2023 RMB/BER business confidence survey.
Hodes said the BankservAfrica data had also shown that average salaries fell by a marked 10.4% in April, signalling a troubled job market.
“The electricity supply predicament continues to weigh heavily on costs, reducing profitability, while consumers remain financially constrained dealing with high inflation and 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.”
Annual consumer inflation slowed to 6.8% in April from 7.1% in March but remained above the SA Reserve Bank’s target range, prompting the bank to hike its benchmark lending rate by 50 basis points to 8.25% per year, with the prime lending rate rising to 11.75% per annum.
While interest rate hikes have contributed to a slower economy, they also contribute directly to a consumer purchasing power constraint because the increased cost of servicing debt means less disposable income available for the cash purchase of consumer goods and services.
FNB property sector strategist John Loos said the April retail sales print showed a continuation of the declining trend, which was likely to contribute to a weakening in the retail property market.
Loos said the key cause of weak real retail sales had been the sharp surge in retail price inflation, from only 3.8% year-on-year in March 2022 to 8.5% in March 2023, before slowing only slightly to 8.2% in April 2023.
“The decline in real retail sales is only one of quite a few negatives for the retail property sector. Tenants and landlords together are required to absorb escalating electricity costs, too,” Loos said.
“Not only are electricity tariff hikes continuing at above general inflation rates, but the erratic power supply necessitates costly power alternatives to keep stores running, and the high costs of diesel for generators have been widely reported by food and beverage retailers, especially.
“And so, not surprisingly, FNB’s Property Broker Survey has begun to point to a weakening in the retail property market, and we would expect to see retail property vacancy rates begin to rise once more, rental growth to slow, and with it a slower year for net operating income growth in 2023.”
BUSINESS REPORT