Nedbank: Retail sales March 2011

17 May.

Nedbank Economic Commentary: Retail sales March 2011.

• In line with our forecast, growth in retail sales slowed to 5,1 % y-o-y in March from 5,5 % in February. The consensus forecast was 5,2 %.
• Over the month, retail sales increased by a seasonally adjusted 0,3 % following a 1,2 % drop in February.
• Six out of the seven sub categories of retail sales expanded on a year- on-year basis, with stronger contribution coming from the ‘household furniture and appliance’ category, which rose by 11,8 %. ‘Food, beverages and tobacco’ is the only category which continues to experience persistent declines, with sales falling for the third consecutive month in March, down by 6,8 % y-o-y.
• During the first quarter of the year, sales rose by a seasonally adjusted 1,7 % q-o-q following a 1, % increase in the final quarter of last year. Compared with the first quarter of 2010, retail sales rose by 5,6 % on an adjusted basis, mainly pushed up sales in general dealers, which rose by 5,4 % followed by ‘textiles and clothing’, which increased by 5,1 % y-o-y.
• While retail sales are likely to continue benefiting from low interest rates and income growth during the year, the growth rate will partly be contained by high debt levels, worries about the prospect of interest rates hikes next year as well as higher petrol and electricity prices.
• Despite rising inflation, we still expect the Reserve Bank’s MPC to delay its first hike until early 2012 as an early interest rate increase would risk curbing the economic recovery.

Comment

Retail sales remained firm in March helped by reasonable consumer confidence. Six of the seven major categories of retail sales recorded an expansion on an annual basis, with stronger contributions coming from the ‘household furniture and appliances’ category, which rose by 11,8% y-o-y following a 7,9% rise in February as well as the ‘general dealers’ category, which recorded its strongest growth rate since July last year, up by 8,0% following a 4,0% increase. Most other categories also recorded sales growth on an annual basis in March, albeit at a more moderate pace compared with February. ‘Food and beverages’ is the only category which recorded a decline, with sales falling by 6,8% and declining for the third consecutive month.

On a month-on-month basis, retail sales increased by a seasonally adjusted 0,3% following a 1,2% drop in February. This pushed the quarterly growth figure to a seasonally adjusted 1,7% q-o-q following a 1,0% increase in the previous quarter. Compared with the first quarter of 2010, retail sales rose by an unadjusted 5,6%, mainly pushed up by a 5,4% y-o-y rise in sales in general dealers as well as in ‘pharmaceuticals and cosmetics’, ‘hardware and paint’ as well as ‘household furniture and appliances’, which increased by 11% y-o-y, 12,5% and 10,5% respectively.

See the full Commentary