South Africa’s retail-sales growth braked to 7,2% year-on-year in December, official data showed on Wednesday, but the slowdown was seen unlikely to sway the central bank’s pending decision on interest rates.
Sales growth eased from a downwardly revised 12% in November, leaving growth for 2006 at 9,7% at constant prices, the highest yearly rise since 2000 and equal to the growth registered in 2004, said Statistics South Africa.
In the three months to the end of December, retail sales rose 9,1% over the same period the previous year, also at constant prices.
Economists said the December annual rise was still high and should have little bearing on the central bank’s monetary policy committee decision on interest rates, due on Thursday.
”To my mind, these are fairly strong figures and do not necessarily build the argument for an unchanged interest-rate decision,” said ETM analyst George Glynos.
”Although it is softer than in November, we must bear in mind the high base on which this growth was calculated.”
Consumer demand has been the main driver of faster growth in Africa’s biggest economy over the past couple of years, but has also added to inflationary pressures, and has so far shown few signs of slowing despite higher interest rates.
South Africa’s central bank raised its key repo rate 200 basis points to 9% in four stages last year to tame rising inflationary pressures, and some expect another increase when the bank’s monetary policy council concludes its meeting.
Business not overly concerned
In a sign that businesses might not be overly concerned about higher interest rates, the monthly trade-conditions index, compiled by Absa bank and the South African Chamber of Business, eased only marginally in January, to 52 points from 53 in December.
The index, which measures sales volumes, new orders, supplier deliveries, inventory levels and employment of wholesalers and retailers, still remained higher than in January of the past four years.
But analysts warn that a further tightening in monetary policy this week may make it prohibitive for businesses to borrow money for crucial expansion programmes and deal a double blow, as consumers also feel the pinch of last year’s hikes.
”The softer growth in retail sales may be early evidence of some moderation in consumer demand due to the effect of higher interest rates and some saturation,” finance group Nedbank said in an analyst note.
”Growth in retail sales is expected to soften further off a high base as the full impact of the tighter monetary policy stance becomes clear.”
Some economists say recent lower-than-expected inflation, money supply and credit data for December could persuade the Reserve Bank to leave rates unchanged for now. — Reuters