Consumer spending remained subdued at the end of the third quarter of 2022 as the cost of living continued to escalate on the back of elevated inflation and rising interest rates.
Data from Statistics South Africa (StatsSA) yesterday showed that retail trade sales recorded its fourth consecutive month of decline in August as consumers absorbed higher prices passed through by retailers.
StatsSA said that the monthly seasonally adjusted retail trade sales fell by 1.8% in August, following a decline of 0.1% in July and 0.4% decrease in June, ending the quarter on a very subdued note.
Investec economist Lara Hodes said consumers’ incomes had also been impacted in August, with real average salaries falling by 8% year-on-year as shown by the BankservAfrica’s Take Home Pay Index (BTPI).
Additionally, Hodes said the results of the TransUnion’s Consumer Pulse Survey for the third quarter indicated that “the rise in inflationary pressure resulted in consumers cutting back on discretionary spending”.
The latest Bureau of Economic Research (BER) Retail Trade Survey confidence among retailers of non-durable goods also declined in the third quarter.
“(The decline was) evincing the current state of consumers, who are grappling with falling real disposable incomes on heightened inflation levels and rising interest rates,” Hodes said.
“Moreover, consumer appetites for new credit or refinancing of existing credit were limited, according to TransUnion, largely due to the elevated cost of borrowing, with further interest rate hikes likely.”
Indeed, the South African Reserve Bank (SARB) is now tipped to raise borrowing costs further in November to curb price pressures after consumer inflation slowed but remained at an elevated 7.5% in August.
Meanwhile, retail sales rose by 2% from a year earlier in August of 2022, after an upwardly revised 8.9% jump in the previous month, but below market forecasts of a 4.2% rise.
StatsSA’s deputy director for distributive trade statistics, Raquel Floris, said general dealers were a key upward driver of growth though they advanced at a slower pace than in July.
“General dealers which include supermarkets recorded an increase of 6.4% due to the fact that general dealers are responsible for a large proportion of sales in the South African retail sector,” Floris said.
“Retailers in textiles, clothing, and household goods also recorded positive year-on-year results. But not all retailers performed well in August.”
Retailers trading in food and beverages, pharmaceuticals and medical goods, and hardware, paint and glass registered year-on-year decreases in August.
In the three months ended August, retail sales fell by 2.1% compared with the previous three months.
However, retail sales rose by 2.6% in the three months ended August compared to the same period last year.
BUSINESS REPORT