Retail confidence in South Africa has retracted back into contractionary territory as consumers became financially constrained by rising food prices and interest rates, while power cuts reduced trading hours for shopping.
Data from the Bureau for Economic Research (BER) latest Retail Trade survey shows that retail confidence has dropped from 51% in the third quarter to 42% in quarter four.
The BER yesterday said that the realities of the tough trading environment had caught up with the retail sector, after months of resilience following the end of the State of Disaster.
BER senior economist Helanya Fourie said this was true across all retail categories and reflected bleak expectations about fourth-quarter sales, despite the festive season and Black Friday.
As a result, Fourie said retailers expected lower sales volumes this quarter compared to the same period last year as consumers are not shopping as much.
“Elevated consumer price inflation and large interest rate hikes limit consumers’ disposable income,” Fourie said.
“With the services sector still recovering from the Covid-19 pandemic, consumers may also be directing a larger share of their spending away from retail towards restaurants, hotels and transport.
“From the supply side, retailers must navigate intense loadshedding, high fuel costs and input pricing pressures.”
The results of this survey comes as headline consumer inflation remained elevated at 7.6% in the fourth quarter, above the South African Reserve Bank’s (SARB) upper limit of 3-6%, driven by food and fuel prices.
As a result, the SARB continued hiking interest rates by a further 75 basis points to end the year at 7% in a bid to tame inflation, a move that has hit household incomes as borrowing costs rose.
According to Fourie, the drop in sales of semi-durable goods was particularly striking. “Compared to the strong growth in sales of clothing and footwear we have seen over the past year, the latest results suggest a slowing pace of recovery,” Fourie said.
The drop in fourth-quarter retail confidence also contradicted the FNB/BER Consumer Confidence Index, which showed improved consumer sentiment and hinted at an increased willingness to spend among consumers.
“If employment creation and moderately higher gross domestic product growth carries through and strengthens consumers’ ability to spend, we may see retail confidence bounce back early next year,” Fourie said.
“Alternatively, consumers may continue to allocate a greater share of expenditure to services.”
In the BER’s Motor Trade survey, confidence among vehicle traders remained stable.
The BER said this was supported by vehicle stocks recovering after the April floods in KwaZulu-Natal and the normalisation of global supply chains.
It also said the increase in consumer sentiment – especially among medium – and high-income consumers – may also have contributed to confidence among motor traders.
BUSINESS REPORT