Nedbank: Retail sales

15 Feb.

Nedbank Economic Commentary: Retail sales.

Retail sales came out stronger than expected in December.

• Annual growth in retail sales accelerated to 8,7 % in December from an upwardly revised 7,2 % in November (previously 6,8 %), against the consensus forecast of a slowdown to 6,5 %.
• All the major categories of retail sales recorded strong growth on a year-on-year basis, but significant contributions came from the ‘textiles, clothing, footwear and leather goods’ and ‘other retailers’ categories, where sales rose by 11,3 % y-o-y and 10,9 % respectively.
• Over the month, total sales rose by 1,3 % on a seasonally adjusted basis and were up by 2,5 %q-o-q during the last quarter of 2011.
• In 2011 as a whole, retail sales rose by 6,1 %, up from 5,1 % in 2010.
• Retail sales will continue to be supported by higher income and low interest rates in 2012. However, challenging global conditions will increase worries about job security, which will weigh on consumer confidence. This, along with high inflation and debt levels will make consumers more cautious, containing growth in retail sales during the year.
• The figures are encouraging, suggesting that consumer spending remains relatively buoyant. However, the production side of the economy is struggling, with considerable downside risks given the troubles in Europe. The Reserve Bank’s MPC will continue focusing on balancing the risks to growth and inflation. We expect the committee to leave interest rates unchanged until around November.

Comment
Retail sales rose by a stronger-than-expected 8,7% y-o-y in December, the strongest growth rate since April 2011, with all the major categories recording growth. The strongest contributions came from the ‘textiles, clothing, footwear and leather goods’ and ‘other retailers’ categories, where sales rose by 11,3% y-o-y and 10,9% respectively, with the growth rates accelerating from 9,4% and 4,9% in November.

On a monthly basis, retail sales rose by 1,3% in December following a contraction in November. This contained sales growth for the last quarter of 2011 to 2,5% q-o-q, following a similar growth rate in the third quarter. However, the quarterly growth rates in both the third and fourth quarters remained the strongest since the first quarter of 2010.

In 2011 as a whole, retail sales increased by 6,1%, rising from 5,1% in 2010 and a contraction of 3,7% in 2009. During the year, sales were supported by higher income growth, discounting and low interest rates. Sales in all the subcategories, except the ‘food, beverages and tobacco’, which contracted by 1,4%, remained buoyant during the year. The main drivers were ‘textiles, clothing, footwear and leather’, ’household furniture, appliances and equipment’, ‘hardware, paint and glass’ as well as general dealers. …

See the full Commentary