GROWTH in retail sales slowed notably to a six-month low in March, providing another indication that economic growth moderated strongly in the first quarter.
Although Statistics SA will only release the first-quarter gross domestic product (GDP) data on May 27, a string of disappointing economic data are already pointing to a poor performance over the period.
Weak economic growth in the first quarter will mean that the remaining three quarters of the year will have to record high economic growth of the Treasury’s forecast for 2.7% economic growth this year are to be realised.
Households play an important role in retail activity. Rising inflation, higher borrowing costs and elevated debt levels are reducing the buying power of their disposable incomes.
Spending by households is also important for economic growth as it makes up a large share of domestic spending.
Retail sales increased by 1% in March this year compared with March last year after increasing by 2.3% year on year in February, Statistics SA figures showed on Wednesday. Sales were down 1.4% in March after falling by 0.3% in February.
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Vunani Securities economist Ilke van Zyl said the latest retail sales figures were not really surprising given that many factors are weighing on household spending.
These included higher interest rates and inflation, lower growth in employee compensations, and base effects relating to the timing of the Easter holidays this year compared with last year.
She expected growth in retail sales to slow to between 1.5%-2% this year from 2.7% last year.
Standard Chartered head of Africa research Razia Khan said the 3.2% increase in retail sales in the first quarter was “not nearly robust enough” to make much difference to gross domestic product (GDP) growth in the first quarter given weakness in mining and manufacturing.
London-based research firm Capital Economics said the latest retail sales data and disappointing mining and manufacturing data pointed to very weak economic growth in the first quarter.
Capital Economics Africa economist Shilan Shah said on Tuesday that GDP growth was likely to have slumped to a seasonally adjusted and annualised 0.2% in the first quarter of this year from 3.8% in the fourth quarter of last year.
Mr Shah attributed this to an ongoing strike at platinum mines as well as moderation in domestic consumption spending.
Old Mutual Investment Group chief economist Rian le Roux said on Tuesday that the Reserve Bank could next week leave interest rates unchanged “for now” given the ongoing strike at platinum mines, “under pressure” consumers, and a “generally uncertain” economic outlook.