Nedbank: Retail sales

16 Jun.

Nedbank Economic Commentary: Retail sales April 2011.

• The annual growth rate rose to 9,8 % from 5,3 % in March, well above the consensus forecast of 5,1 %.
• Over the month, sales may have been boosted by the large number of public holidays which provided consumers with additional time to spend. All the major categories of sales recorded growth on an annual basis, but stronger contributions came from the ‘textiles, clothing, footwear and leather goods’ and ‘pharmaceutical and medical goods, cosmetics and toiletries’ categories, which rose by 16,9 % and 13,7 % respectively.
• The exceptionally strong retail sales numbers for April is unlikely to signal the start of a new acceleration, however. In the months ahead, sales growth is likely to moderate off the higher base as consumer confidence softens slightly on slow job creation, rising cost pressures and prospects of higher interest rates.
• Today’s numbers are encouraging and suggest that consumer demand has been stronger than expected. However, the MPC is unlikely to read too much into one number, which can be volatile and goes counter to other statistics such as household credit. The committee generally views the economic recovery as hesitant and the rise in inflation as temporary. As a result, we still expect the Reserve Bank’s MPC to delay its first hike until early 2012, as hiking may hurt a vulnerable recovery.

Comment

Retail sales were probably boosted by the large number of public holidays in April, which provided additional time to spend. Over the month, sales rose by seasonally adjusted 2,3%, the strongest monthly increase since June 2008. On an annual basis, all seven major categories of retail sales recorded growth. The strongest contributions came from ‘textiles, clothing, footwear and leather goods’, ‘pharmaceutical and medical goods, cosmetics and toiletries’ and ‘household furniture, appliances and equipment’, which rose by 16,9% y-o-y, 13,7%, and 13,1% respectively. Sales in the ‘general dealers’ category, which accounts for 39% of total sales remained firm at 7,3% following a 7,1% rise in March. The ‘food, beverages and tobacco in specialised stores’ category, which experienced three successive months of declines earlier also rebounded strongly in April, with sales rising by 6,6% y-o-y.

Over the three month period to April, retail sales rose by 6,9% compared with the same period last year.

See the full Commentary