South African consumers opened the third quarter on a stronger footing, with retail sales jumping 3.4% year on year in July after the economy contracted during the previous three months.
The increase was the strongest since January and accelerated sharply from the 1.1% growth recorded in June.
It also comfortably beat economists’ forecasts of around 1%.
On a seasonally adjusted basis, retail sales increased 2.5% from June, reversing the previous month’s 0.8% decline.
Where South Africans spent their money
General dealers provided the biggest contribution to July’s improvement.
Sales in the category increased 3.2%, contributing 1.3 percentage points to overall retail growth.
The improvement was relatively broad across the retail sector.
Sales among “other” retailers, which includes online stores and specialist retailers, climbed 6.8%.
Specialised food, beverage and tobacco stores recorded growth of 4.8%, while clothing, footwear and leather goods retailers increased sales by 2.9%.
Retail sales rise 2.2% over three months
Looking beyond the July figures, retail sales for the three months to July were 2.2% higher than during the corresponding period last year.
Household furniture, appliances and equipment recorded particularly strong growth of 7.6% over the period.
Hardware, paint and glass retailers went in the opposite direction, with sales declining 1.8%.
Lower inflation gives households some breathing room
Softer inflation appears to have played an important role in the improvement in consumer spending.
Inflation cooled to 4.3% in July, while fuel price cuts provided further support for real household income.
One payroll provider’s net salary index increased 0.4% month on month over the same period.
The retail figures provide an early indication that some of this improved spending power translated into actual consumer spending during July.
Consumer spending offers support after GDP contraction
The stronger numbers come after South Africa’s GDP contracted by 0.2% during the second quarter.
Trade, catering and accommodation were among the main drags on economic growth during the period.
Despite the broader contraction, household consumption increased by 0.4% during the quarter.
July’s retail figures now point to stronger consumer activity at the beginning of the second half of the year.
However, the improvement remains closely linked to the relief provided by softer inflation.
With oil prices pushing back towards $100 a barrel, that relief now faces renewed pressure, potentially threatening one of the factors supporting household spending.
Read SA Business Integrator online
