Inflation and retail data indicate consumer recovery

Increases in inflation and retail sales figures point to a steadily recovering consumer, which bodes well for the South African economy.

Increases in retail and inflation shows South African consumers are slowly recovering, which points to a positive outlook for the South African economy, economists told the Mail & Guardian on Wednesday.

According to data released by Statistics SA, retail sales accelerated by 7.1% year on year in August from 3% in July, while inflation weighed in at 5.7% year on year in September compared to 5.3% in August.

Household furniture, appliances and equipment retailers were the biggest influence on stronger retail figures after seeing a rise in sales of 14.3%.

Higher food prices coupled with minor surges in housing valuations and increases in the petrol price were seen as the main reasons for the jump in inflation figures.

Nevertheless, while inflation was higher than forecasters initially predicted and is skirting the South African Reserve Bank’s (SARB) inflationary target band, the jump in consumer activity is a good sign for the South African economy.

“There is a lot of volatility in these types of figures but the bottom line is that consumers are coming back to the party which in essence means good things for the South African economy. A consumer slowly coming out of their shell after tough economic times will lead to a knock on effect in other sectors,” Efficient Group chief economist Dawie Roodt told M&G.

Roodt’s comments will be welcomed in tough economic times in 2011 that has seen an increase in national unemployment and downward revisions of economic growth.

The figures must be taken within the context of uncertain global economic times along with an increase in consumer pressures, according to Chris Gilmour of Absa Investments.

“It is safe to say that consumer forces are alive and that rises in electricity and a weaker rand has left them relatively unscathed. However, we must remember that this growth is not across the retail board. You will find far more growth in the lower and upper segments of the industry. Accordingly, the broad middle of our economy is gently being squeezed,” Gilmour said.

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