South African retail sales fell more sharply than expected in November, highlighting the weakness of consumer demand and raising hopes that there is still a chance for another interest rate cut this year.
Statistics South Africa said on Wednesday retail sales fell by 6,6% year-on-year in November at constant prices, weaker than the forecasted 5% decline and a revised 6,1% fall in October.
In the three months to November, sales fell by 5,9% compared with the same period a year ago, also at constant prices.
The South African economy followed other countries out of the recession in the third quarter of 2009 but domestic demand-related sectors are still struggling under the weight of high consumer debt levels and a million jobs lost due to the downturn.
The central bank’s monetary policy committee (MPC) meets from Monday to deliberate on interest rates. The MPC left the repo rate flat at 7% at its last three meetings, after cutting rates by 500 basis points between December 2008 and August 2009.
Analysts said that despite weak retail sales, the central bank will likely keep rates on hold on Tuesday.
“It doesn’t come as a big surprise and that is indicative to us [that] it’s going to take quite a while for households to recover,” said Ian Marsberg, macro-strategist at Absa Capital.
“On the interest rates, it doesn’t alter our view. At this stage we still believe interest rates are going to remain relatively low for an extended period,” he said. — Reuters