Retail sales update: October retail sales growth slows ahead of the festive season

12 Dec 2017

Annabel Bishop

Chief Economist

Retail sales growth slowed to 3.2% y/y in October from 5.7% y/y in September (revised up from 5.4% y/y). The outcome was lower than consensus of 5.3% y/y.

Figure 1: Real retail sales and SACCI’s Trade Expectations Index (TEI)
  • Retail sales growth slowed to 3.2% y/y in October from 5.7% y/y in September (revised up from 5.4% y/y). The outcome was lower than consensus of 5.3% y/y.
  • The deceleration in retail sales in October could be a function of consumers delaying purchases to take advantage of Black Friday specials in the month of November.
  • The moderation in October retail sales growth was attributed to slower growth in all ‘other’ retailers (retailers in reading matter, jewellery, sports goods, personal and household goods, second-hand goods and retail trade not in stores) of 15.0% y/y versus a prior 19.4% y/y. The contribution from this category therefore decreased to 1.7% from 2.1% in the prior month.
  • All ‘other’ retailers remained the main contributor to the headline retail sales outcomes. In the main, this category likely captures the effects of increased online shopping.
  • Growth slowed in all of the remaining categories barring pharmaceutical retailers where growth, and the contribution, increased in October. The exceptions were also general dealers and hardware retailers where sales contracted in October (see figure 3).
  • In the year to date to October retail sales lifted by 2.0% y/y, similar to the 1.9% y/y increase in the same period last year. However, the composition of the main contributors has changed (see figure 2).
  • All ‘other’ retailers, food and pharmaceutical retailers have outperformed the remaining categories so far this year. In January - October 2016, it was general dealers and pharmaceuticals that led growth. Some of the change can likely be ascribed to weight and sampling amendments earlier this year.
  • Going forward the performance of retail sales will be determined by consumption growth which we expect to remain modest. Indeed, further tax increases in the 2018 Budget are likely, unemployment is high and there has been a renewed tightening of credit standards applied to households (see figure 4). Moreover, depressed consumer confidence has also impacted consumers’ willingness to spend.
  • Confidence amongst retailers also remains depressed according to the Q4.17 BER Retail Survey. Respondents noted that “conditions in the retail sector remain tough” and the net majority expect business conditions to deteriorate in Q1.18.
Figure 2: Contributions to rear to date retail sales by type of retailer
Figure 3: Retail trade sales by type of retailer (at constant prices)
Figure 4: Credit standards for approving loans