Consumers are not giving up without a fight

July 2015 retail trade sales expanded 3,3% year-on-year, but growth slowed from an upwardly revised 3,8% in June, and totalled 3% year-to-date.
The positive performance was broad-based, and gets the first month of 3Q15 off to a positive start. We suspect there are some lingering base effects from last year’s platinum strike (where an estimated R10bn in wages was lost), but the performance is nonetheless encouraging.

Hardware, clothing, and pharmaceutical retailers were the best performers, gaining 6,3%, 3,9%, and 3,5% respectively. General dealers grew a respectable 2,8% year-on-year, while food and beverage retailers gained 1,2% from a -0,5% contraction in June. Furniture retail growth slowed markedly to just 0,9% year-on-year, and reflects the mounting consumer headwinds evident in the detail from yesterday’s quarterly bulletin. Vehicle sales growth (not part of this survey) are already deep in the red and the slowdown is now seemingly filtering into the furniture space. Despite a good performance from the clothing sector, we suspect that margins are being compressed in order to maintain sales momentum.

With rising inflation, low consumer confidence and the potential for interest rate increase, we do not expect this momentum to be maintained. Lower wage settlements and rising inflation have already seen disposable income growth slow to 1,6% and household consumption to 1,2% quarter on quarter in 2Q15.

Source: Jason Muscat for

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