South Africa’s retail sales fell by 5,5% year-on-year in August at constant prices, official data showed on Wednesday, pointing to slowing consumer spending as higher interest rates strain household budgets.
Statistics South Africa said the annual drop in sales — the biggest fall in at least a decade — followed a 4,6% decline in July.
Retail sales have cooled sharply this year after a series of interest-rate increases following years of strong growth that helped lift economic growth to about 5% a year.
The central bank left its repo rate at 12% this month after lifting it five percentage points between June 2006 and June 2008.
Analysts said consumers were clearly under pressure and the trend in sales was unlikely to change until inflation and interest rates started to ease.
”I did expect quite a bad number. I think it’s the lagged impact of high interest rates and also the negative impact of high inflation on the retail side,” Thebe Securities economist Elize Kruger said.
”I don’t think that will turn around any time soon. Not before we’ve seen inflation and interest rates turning around.”
South Africa’s central bank is widely expected to start cutting interest rates in mid-2009 due to slower growth and an expected easing in inflation, but evidence of severe strain on consumers may bring this forward.
However, inflation remains a serious concern in the short term with the targeted CPIX gauge at a record 13,6%year-on-year in August — more than double the top end of the 3% to 6% band.
”I think it’s a bit too soon to start talking about [interest-rate] cuts, but I think it still confirms that there’s definitely no more interest-rate hikes,” Efficient Group economist Fanie Joubert said.
Statistics South Africa said retail sales decreased by 3,8% in the three months to August, compared with the same period the previous year, also at constant prices. — Reuters