BY Fast Company 2 MINUTE READ

The retail trade sales have increased by 5,3% year-on-year in December 2017. This was a strong growth than expected, according to Azar Jammine, a chief economist at Econometrix.

According to figures by Statistics South Africa, the highest annual growth rates were recorded for all ‘other’ retailers at 14,7%; and retailers in household furniture, appliances and equipment at 10,0%.

Jammine explained that there was continuing strong growth in respect of sales of furniture and appliances as well as sales amongst ‘all other retailers’, which some suspect is linked to increased online sales, seemingly defined as ‘retail trade not in stores’.

Stats SA said that the main contributors to the 5,3% increase, with each contributing 1,4 percentage points, were: all ‘other’ retailers; general dealers; and retailers in textiles, clothing, footwear and leather goods.

In 2017, retail trade sales increased by 3,0% compared with 2016. The main contributors to this increase were: all ‘other’ retailers -11,3% and contributing 1,2 percentage points); and general dealers – 1,1% and contributing 0,5 of a percentage point.

The report revealed that the seasonally adjusted retail trade sales decreased by 2,6% month-on-month in December 2017. This followed month-on-month changes of 3,8% in November 2017 and -0,1% in October 2017.

Jammine said that “Even though on a month-on-month seasonally adjusted basis sales declined by 2.6% in December, this was less of a decline than it might have been anticipated”.

Stats SA reported that in the fourth quarter of 2017, seasonally adjusted retail trade sales increased by 2,2% compared with the previous quarter.

Compared with the fourth quarter of 2016, the retail trade sales increased by 5,6% in the fourth quarter of 2017.

Jammine points out that a number of factors have contributed towards this improvement: Firstly, the ending of drought conditions in the summer rainfall regions resulted in food inflation declining quite sharply from its double digit levels at the end of 2016.

Secondly, the average value of the rand during 2017 has proved to be significantly stronger than in 2016, contributing towards a steeper decline in inflation than had been anticipated in early 2017. “It also facilitated a -0.25 % reduction in the repo rate in July,” Jammine added.

Thirdly, Jammine notes that “the election of Cyril Ramaphosa as the ANC president at the party’s elective conference in mid-December might have resulted in increased consumer confidence towards the end of the month, encouraging a spurt feel-good buying”.

The main contributors to this increase were: all ‘other’ retailers – 16,8% and contributing 1,7 percentage points; retailers in textiles, clothing, footwear and leather goods – 7,7% and contributing 1,5 percentage points; and general dealers – 3,0% and contributing 1,3 percentage points.

Jason Muscat, FNB Senior economic analyst said, “We expect the sector’s recovery to continue throughout 2018, spurred on by low inflation, another 25bps interest rate cut in the first half of the year, and decent real wage growth”.