SA SHOPPERS were more active than many had expected last year, but the outlook for the current year is more gloomy owing to the expectations of higher interest rates.
Statistics SA data released yesterday showed that local demand conditions might not have been as soft as some had feared, reflecting a 3,9% year-on-year growth rate from 3,5% in 2000
But Absa economist John Loos said retail sales appeared to have peaked in the first half of the year.
December retail sales grew 4,6% year on year.
Economists at JP Morgan say that, while domestic demand was reasonable in December after September's 100 basis point rate cut and the effects of Christmas sales, no boom was evident.
JP Morgan said much of the strength in retail sales towards the end of the year was a result of preemptive buying in anticipation of price increases caused by the rand's losses.
Retail sales rose across the board, and among the fastest-growing categories were durable and semidurable goods like clothing and footwear, and sport and recreation requisites.
Loos said that these products were all fairly sensitive to interest rates, and had enjoyed a surge in sales because of low, stable rates last year.
However, Loos said that there was cause for concern in the strong growth of pharmaceuticals, cosmetics and toiletries, as real sales in this category shrank 0,5% last year, but their value increased 10%, an indication of high inflation in this group of products.
'This is part of a long-term trend that suggests that price increases might be making pharmaceutical products unavailable to many people,' Loos said.
Loos said other categories like books and magazines, which have had a 70% inflation rate since 1995, and nonedible groceries, which have showed a 63% gain, have also had consistently high inflation rates since 1995.
Cash sales made up for 76,6% of all purchases last year, up from 74,5% in 2000.
Absa said this was clear evidence that consumers were adopting a more responsible approach to credit and had higher disposable incomes last year thanks to a relatively good economic year in 2000.
Economists have argued that SA households are still smarting from the sharp rise in interest rates during 1997 and 1998, and are more cautious about accumulating debt.
Instalment sales accounted for 13,4% of all sales, while other types of store credit accounted for 12,5% of total sales. The outlook for retail sales this year was not as good as 2001's, as the slowing economy, coupled with higher interest rates, should put the brakes on retail sales, said Loos.
Publisher: Business Day
Source: Business Day
Interest rates gloom hits shopping outlook
Posted On Thursday, 07 March 2002 03:01 Published by eProperty News
SA SHOPPERS were more active than many had expected last year, but the outlook for the current year is more gloomy owing to the expectations of higher interest rates.
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