Retail sales quicken slightly

IOL pic dec7 weekly gallery retail trade data REUTERS File picture: Eric Vidal, Reuters

Johannesburg - Retail sales growth quickened slightly year-on-year in December to 4.1 percent, from 3.8 percent in November.

According to the Statistics SA figures released on Wednesday, real retail sales growth averaged 3.3 percent for 2015 compared to 2014. This strips out the inflationary effect on sales growth.

Investec explains growth was bolstered through the 10.1 percent increase in civil servant remuneration last year, announced in October, as well as the R1.22/litre cut in the petrol price from August to December.

“Retail sales growth continues to be positively impacted by the increase in civil servants remuneration of above 10 percent year-on-year, well above the 6 percent year-on-year upper limit of the inflation target.

Read also: Inflation: Expect a rate hike

“ Credit rating agencies have downgraded SA and threaten to place the country on a sub-investment grade rating as government expenditure persists in being substantially above its revenue.”

Investec says, should Finance Minister Pravin Gordhan deliver a budget that shows an outright cut in government current expenditure, strong measures to support economic growth and moderation on the tax front in acknowledgment of the heightened risk of recession, this would go a long way to reduce the chance of further credit rating downgrades for SA.

The budget will be presented next Wednesday.

Investec adds retailers point to weakening consumer spending, the negative impact of higher interest rates on their clients’ spend, high number of clients with financial problems with their accounts, clients’ low appetite for credit, negative consumer confidence and prospect of marked cost containment, particularly retrenchment of staff.

“The direct links between slowing GDP growth, slowing household consumption expenditure growth, falling consumer confidence and interest rate increases foretells increased risk of recession. The pull back in the rand, if it persists could stay the MPC’s [Monetary Policy Committee's] hand on interest rates in March, but further interest rate hikes are likely this year.”

IOL

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