By Koketso Mano
Retail sales fell by 0.8% y/y in February, from a decline of 2.0% in January (revised from -2.1%). Although the outcome is discouraging, it was still better than the Reuters consensus of a 1.6% decline. On a month-on-month basis, volumes rebounded by 0.4%, barely offsetting the 3.2% decline in January. Thus, volume sales in the last three months (Dec-Feb) are lower by 0.5% compared to the three months prior, implying that the retail industry is currently detracting from 1Q24 GDP growth. This means that the slight positivity in volumes growth signalled by the 1Q24 BER Retailer Survey is yet to reflect in official retail sales numbers.
Retail sales outlet performance
Three out of seven categories recorded a decline in annual volumes. The clothing and footwear category was largely responsible for the decline, at-6.8% y/y, detracting 1.1ppts from the headline number and was followed by Other retailers with a 3.3% decline, detracting 0.4ppts. Hardware volumes continued to slide, recording -2.2% and shaving off a further 0.2ppts. This marks the tenth consecutive month of decline in hardware volume sales as consumers continue to cut back on home improvements in favour of basic necessities. Among the top performers were General dealers (+0.9% y/y, adding 0.4ppts), Pharmaceuticals (2.6%, 0.2ppts) as well as Household furniture retailers at 3.6%, adding 0.2ppts to the headline. Food and beverages retailers also saw increased volumes, by 1.4%, contributing 0.1ppts.
Outlook
Retail volumes continue to reflect a subdued consumer demand environment. We expect this to persist in the near term, driven by sticky inflation, high interest rates and depressed consumer confidence. Furthermore, the prevailing tight lending standards and high debt service cost environment should keep credit growth relatively contained, both in the bank and non-bank sectors, and thus provide less support to consumption. That said, the medium- to longer-term outlook is slightly brighter. Consumers should benefit from the slowing inflation trend, positive employment gains, and the extension of the Social Relief of Distress (SRD) grant. In addition, the contemplated, albeit modest, interest rate cutting cycle should help support spending on discretionary items.
