South Africa’s annualised retail sales grew for the first time in nine months in January, data showed on Wednesday, but analysts warned the rise may be short-lived as jobs are cut and economic growth wanes.
Statistics South Africa said sales rose by 1,7% compared to the same month last year, the first growth since April 2008 and the highest rate since February last year, compared to a contraction of 0,2% year-on-year in December.
The data could temper calls for a rate cut before the central bank’s April 15 and 16 policy meeting, which had been expected to be announced weeks ago following poor economic and manufacturing numbers.
But analysts warned the January growth may not signal the start of a trend and could be a knee-jerk reaction to sharply lower fuel prices, as well as base effects following power cuts during January 2008.
”We expected retail sales to be negative so it is surprising that it seems to be holding up fairly well. It can be the effect of the lower fuel prices in January and also the December cut in interest rates,” Citadel economist Salomi Odendaal said.
”But, we still expect retail sales to remain fairly weak with job losses and high food prices. So we expect retail sales on the negative side for the rest of the year.”
South Africa’s central bank cut its repo lending rate by 50 basis points in December, the first cut following five percentage point in hikes between June 2006 and June 2008.
It followed that up with another 100 basis point cut to 10,5% in February, and the market and analysts forecast more aggressive moves to come.
Petrol pump prices fell by 18% in both December and January, before rising again in February.
Heightened speculation of an inter-meeting reduction has faded, though, with inflation higher than expected in January at 8,1%.
Government bonds weakened after the retail sales release, with the yield — which moves inversely to the price — on the 2015 bond extending its rise for the session to 8,5 basis points at 7,985%.
The retail sector is, so far, the only one showing signs of recovery, and the central bank will likely still be worried about plunging manufacturing output and a 25% drop in exports in January.
Africa’s biggest economy contracted 1,8% in the fourth quarter of 2008, and most economists predict first quarter data will confirm its first recession in 17 years.
Stats SA said retail sales contracted 1% in the three months to January, compared to the same period a year ago. – Reuters