South African retail-sales growth jumped to 9% year-on-year in May at constant prices, official data showed on Wednesday, adding pressure on the Reserve Bank to raise interest rates further.
Statistics South Africa said the sales growth surged from an upwardly revised 5,9% in April, lifting the number for the three months to May to 8,5% compared with the same period in 2006.
Analysts said the data showed consumer spending remained strong despite the increase in interest rates last year, and would back the case for another rate hike in August.
”I would say that is definitely quite a strong number. That is not good news from an interest-rate perspective,” Nedbank senior economist Nicky Weimar said.
May’s figure would not have been impacted by the central bank’s 50 basis point repo-rate rise in June, but follows 200 basis points in hikes during the second half of last year.
Consumer demand has been the main driver of faster growth in Africa’s biggest economy over the past couple of years, but high spending has been a concern for the bank, helping to push inflation up through the top end of the 3% to 6% band.
The targeted CPIX (consumer inflation less mortgage costs) inflation breached the band for the second consecutive month at 6,4% year-on-year in May, raising the chances of another 50 basis point rise at the next monetary policy meeting in August.
Further pressure from higher-than-expected spending could add to that upward pressure and the possibility August may not be the end of the upward cycle.
But some analysts said other indicators, including vehicle sales, pointed to consumers cutting back on spending, adding a slowdown could be expected from June when a new law clamping down on credit extension came into force.
”Underlying it would still point to a very strong spending economy … it would certainly suggest that there is upward pressure on interest rates from the spending side,” Citadel economist Dave Mohr said.
”One would just have to caution that there will probably be some form of slowdown in June due to the Credit Act impact on credit base spending.” — Reuters