Retail sales update: Retail sales growth lifted in Q3.17 but at a relatively muted rate as household spending remains constrained

14 Nov 2017

Annabel Bishop

Chief Economist

Figure 1: Real retail sales and SACCI’s Trade Expectations Index (TEI)
  • Retail sales growth increased at the same rate of 5.4% y/y in September as in August, with the growth exceeding the consensus forecast of 4.5% y/y.
  • The main contributors to the increase in September were all ‘other’ retailers, general dealers and clothing retailers (see figure 3).
  • On a year to date basis food, pharmaceutical and ‘all other’ retail sales have outperformed sales in general dealers as well as sales in the semi-durable goods (clothing) and durable goods (furniture and hardware) categories (see figure 2). This performance would suggest that consumer spending has been diverted away from the more non-essential items.
  • Retail sector activity has been constrained by modest growth in household consumption expenditure that we project at a still weak 1.0% y/y versus 0.8% y/y in 2016.
  • Decelerating inflation during 2017 has provided some relief to households but consumption growth has been constrained by a number of factors. These include tax increases, high unemployment and weaker income growth. According to recent SARB data, nominal household disposable income growth slowed to 6.5% y/y in Q2.17 from 7.3% y/y in Q1.17.
  • Moreover, private sector credit dynamics have been subdued as consumers remain highly indebted and credit conditions remain relatively tight. Persistently depressed consumer confidence has also impacted consumers’ willingness to spend, particularly for big ticket items.
  • The September update concludes the sector’s releases for the Q3.17 period and the seasonally adjusted measure, which is used to determine GDP, signals that the sector will make a positive but relatively modest contribution to Q3.17 GDP. In particular, on a seasonally adjusted basis, retail sales grew by 1.4% q/q in Q3.17 compared to 2.0% q/q in Q2.17.
Year to date retail sales by type of retailer
Figure 3: Retail trade sales by type of retailer (at constant prices)
Figure 4: Compensation of employees