Business conditions in the retail sector in the first quarter of 2011 improved for the first time since 2007, the results of the Bureau for Economic Research (BER) Retail Survey released on Thursday show.
“This is the first positive rating [ie improvement] for the BER’s ‘change in business conditions’ index since the third quarter of 2007,” the BER said in a statement.
“The rebound in business conditions can probably be ascribed to significantly higher increases in selling prices in the trade sector during the first quarter of 2011, coupled with solid growth in retail sales volumes.”
A net 43% of retailers expected a further improvement in business conditions during the next quarter. However, the percentage of retailers satisfied with prevailing business conditions — or business confidence — declined slightly in the first quarter of 2011.
Economist Linette Ellis said this contraction could be attributed to a sharp drop in business confidence levels of retailers in semi-durable goods. This was a result of weak sales growth in textiles, clothing and footwear in the quarter.
“The confidence levels of retailers in hardware also deteriorated, but furniture retailers and retailers in non-durable goods [eg food, beverages, pharmaceuticals and cosmetics] remained very optimistic.”
Food prices may rebound stronger
Retail selling prices increased significantly during the first quarter, suggesting accelerating inflation.
The price increases were particularly high in the non-durable goods trade, “hinting that food prices may rebound more strongly than many forecasters anticipated”.
“The vast majority of retailers also reported increases in their purchase prices, suggesting that their selling price increases to a large extent reflect cost-push factors such as higher commodity prices, soaring electricity and petrol prices and rising wages,” said Ellis.
Growth in retail sales volumes tapered off slightly during the first quarter.
Ellis said during 2010, high real wage increases, low interest rates, a strong rand (and thus low import prices), pent-up demand and high consumer confidence saw a better-than-expected bounce back in retail sales volumes.
“Given our projection of lower real wage increases, increasing food and fuel prices and no further interest rate cuts, as well as due to base effects, we expect the growth in retail sales volumes to ease somewhat during 2011,” she said. — Sapa