South Africa’s retail sales growth slowed sharply to 5,4% year-on-year in April, official data showed, suggesting higher interest rates may finally be biting into stubbornly high consumer spending.
Consumer demand has been the main driver of faster growth in Africa’s biggest economy over the past couple of years, but it has also added to inflationary pressures and has, until now, shown few signs of abating.
Statistics South Africa said on Wednesday the retail sales — the main measure of consumer demand — eased from an annualised 10,5% in March. It grew by 8% in the three months to end April compared with the same period last year.
Analysts said the sharp slowdown could be an anomaly of volatile data but may also suggest that consumers were beginning to feel the effects of higher interest rates.
”Jeepers that’s a sharp slowdown! That’s the lowest since January 2005 … [but] I think it might be a one-off event. I don’t think we’re going to see such a slow rate of increase again next month,” said Nico Kelder, economist at Efficient Group.
”But it does indicate that consumers are feeling the pinch from interest rates and they are starting to respond accordingly by reducing their spending,” he said.
Sales growth jumped in March, dashing optimism from a slowdown the previous month that consumers were finally heeding central bank calls to tighten their purse strings.
South Africa’s central bank lifted its repo interest rate by 50 basis points to 9,5% last week, resuming an upward cycle from last year to tame high spending and rising inflation.
It increased rates by 200 basis point between June and December 2006.
Reserve Bank Governor Tito Mboweni said last week there was a strong upward bias in inflation beyond high food and fuel prices, hinting at more interest rate increases, and repeated a warning to consumer to cut their spending and debt. — Reuters