Nedbank: Retail sales

22 Sep.

Nedbank Economic Commentary: Retail sales July 2011.

Retail sales came out better than expected in July.

• Retail sales increased by 2,8% y-o-y in July, up from 2,4% in the previous month, against the consensus forecast for a slowdown to 1,3%.
• Sales were mainly boosted by the ‘household furniture, appliances and equipment’ category, which rose by 11,6% y-o-y following a 7,3% increase in June as well as firm sales of ‘hardware, paint and glass’ and ‘textiles, clothing, footwear and leather goods’, which increased by 9,3% and 7,9% respectively.
• On a monthly basis, total sales rose by seasonally adjusted 1,3%, down from 1,5% recorded in June.
• Better than expected retail sales figures for July are encouraging. However, growth in retail sales is not expected to regain the momentum seen earlier in the year as consumer confidence is likely to still be weighed down by the weak job market, high debt levels and increasing cost pressures from administered goods and services, which will make households more cautious on spending.
• Although worries over the downside risk to economic growth are likely to dominate policy concerns, the continued rise in inflation and the expected breach of the target range early next year will make the MPC cautious. The wait-and-see approach is therefore expected to be maintained at the end of this week’s meeting and well into 2012, leaving interest rates on hold at current levels for longer. However, if local and global economic conditions were to weaken further, with recession threatening, another interest rate cut may be on the cards before the year is done.

Comment

Stronger than expected sales for July were mainly supported by sales of ‘household furniture, appliances and equipment’, which rose by up by 11,6% y-o-y due to price discounting in that category. Sales of ‘hardware, paint and glass’ and ‘textiles, clothing, footwear and leather goods’ also remained firm at 9,3% y-o-y and 7,9% y-o-y respectively from 3,9% and 3,2% in June. In contrast, sales of ‘pharmaceutical and medical goods, cosmetics and toiletries’ recorded its first annual decline, falling 0,2% y-o-y after rising by 5,7% in June. Sales in general dealers, which has the biggest weight in the sample, also declined for the first time since January 2010, falling by 0,5% y-o-y.

On a monthly basis, retail sales increased by a seasonally adjusted 1,3%, with the growth rate moderating slightly from 1,5% in June. Over the three month period to July, sales increased by 2,1% y-o-y and were up by 4,6% in the first seven months of the year compared with the same period in 2010. …

See the full Commentary