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12 Aug 2009 12:23
Retail sales declined in June, reflecting that the economy was in the midst of the worst recession in decades, according to data released by Statistics South Africa on Wednesday.
Retail sales contracted by 6,7% year-on-year in June from a revised 4,4% contraction in May, Statistics SA said.
“We think the number was very weak,” said Nedbank economist Nicky Weimar.
“What we’re probably seeing is a reflection of a household sector that has very little confidence, that is still dealing with heavy debt burdens,” she added.
Asked about positives such as interest rate cuts, Weimar said that lower rates would take about 12 to 18 months to reflect in the economy.
She said she expected to see retail sales beginning a recovery at the end of the year.
Asked if Wednesday’s data would influence the South African Reserve Bank’s Monetary Policy Committee (MPC)‘s decision on rates, Weimar said that the MPC might hesitate to cut the repo rate.
“They’ve had only one month of evidence that inflation is decelerating,” Weimar added.
However, she said that Nedbank had always held the view that there would be another 100 basis points cut in the key benchmark rate before the end of the year.
“The case for a cut in rates is there—we’re certainly seeing sustained weakness in the economy and there are early signs that inflation is gaining downward momentum,” she noted.
Turning to the Gross Domestic Product (GDP) figure for the second quarter that will be released next week, Weimar said Nedbank had forecast a contraction of one percent.
“But this data might make the number worse,” she added.—Sapa
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