Retail sector holding up despite high interest rates

Posted On Friday, 06 June 2003 02:00 Published by
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CONSUMER spending remained robust in the first quarter with retail sales showing steady growth, according to figures released yesterday by Statistics SA.

CONSUMER spending remained robust in the first quarter with retail sales showing steady growth, according to figures released yesterday by Statistics SA.

Real retail trade sales grew by 1,7% on a seasonally adjusted basis in the first quarter compared to the fourth quarter of last year.

The figures were even better on a year-on-year basis, showing 3,1% growth in real retail sales in the first quarter compared with the same period last year.

During March alone, retail trade sales grew by an annual 3,1%, compared to 2,6% in February, pointing towards resilient domestic demand despite relatively high interest rates.

However, economists expected retail sales to have declined sharply after March, as consumer confidence fell and expenditure was reined in.

The latest SA trade management index compiled by Standard Bank and the SA Chamber of Business which dropped to its lowest level since 2000, also pointed to weaker conditions in the retail sector.

However, retailers were optimistic that domestic demand would improve later this year, with lower interest rates and a drop in inflation helping to boost sales.

Stats SA said 15 of the 19 retail sectors showed increases in real retail trade sales in the first quarter.

Large increases were recorded in sales of categories such as footwear, furniture, televisions and video recorders and glass and crockery. Consumers spent less on sport and recreation , textiles, jewellery and other domestic furnishings.

Cash was still the most popular form of payment during March, with 80,1% of purchases made in cash. This is only slightly higher than the 79,3% of cash sales for the same period last year.

High interest rates have cut demand for credit sales, which dropped from 8% to 7,8% in March. Other credit sales as a proportion of total sales also fell by 0,6 percentage points to 12,1% in March.

Gauteng leads other provinces in terms of retail sales, with R5,5bn recorded in March. This was followed by Western Cape, with sales of R3,2bn, KwaZulu-Natal at R2,8bn and Eastern Cape at R1,3bn.

Standard Bank said weaker trade conditions would have a negative impact on employment in the sector, with retailers not creating new jobs or retrenching to cut costs.

Weaker domestic demand is likely to curtail gross domestic product growth, which slowed to 1,5% in the first quarter, compared to 2,4% growth in the fourth quarter last year.

Jun 05 2003 07:31:21:000AM Nasreen Seria Business Day 1st Edition


Publisher: Business Day
Source: Business Day

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