Retail sales up 4.1 per cent in third quarter as real household debt falls
New figures show retail sales in South Africa rose during the third quarter of the year by 4.1 per cent compared with the same period in 2016 coinciding with an increase in household disposable income, says a report out this week.
That is good news for retailers across the country following on from the 2.2 per cent year on year gain in the second quarter to June. And there is some evidence that the increase, in the face of months of negative predictions by economists has caught some retailers by surprise with reports of them running out of stock.
Statistics South Africa (Stats SA) say the retail gains are backed by five months of growth in new vehicle sales and may signal the first turnaround in the country’s economy since December 2015.
Retail sales in 2016 increased just 1.7 per cent compared with the previous year and the first quarter of 2017 had shown a 0.7 per cent fall.
Grocott’s Mail reported: “This data shows that many households seem to be in better shape to weather economic storms than they were last year.
It adds “Economists generally have a poor forecasting record at turning points as it is human nature to project the present into the future, so the recession in the last quarter last year and first quarter this year may have tainted their forecasts.
The credit bureau Transunion when commenting on the first quarter Consumer Credit Index (CCI) data had advised thatthat households were better equipped this year than last year to handle adverse economic conditions, “but that advice seems to have gone unheeded,” says Grocott’s.
“And as a result many retailers are suffering ‘stock outs’ as they do not have sufficient inventory to cope with a resurgent consumer.”
It says that this poor inventory situation was exacerbated by the October storms in KwaZulu-Natal that disrupted port operations at Durban. As Durban is the main entry point for imported consumer goods with full containers imported declining by 17.9 per cent year on year.
In its report Grocott’s refers to the latest Transunion report that said although consumer credit health dipped in the third quarter from the second quarter, it remained above the break-even 50 level. The Consumer Credit Index (CCI) eased to 53.9 in the third quarter from 54.1 in the second quarter and has been above 50 since last year.
The CCI is a measure of overall credit health among South African borrowers, based on data gathered from some 54 million accounts and a revolving credit value near R150 billion.
“The central theme in this report is that household debt is growing at a slower pace than household income. South African Reserve Bank (SARB) data shows household debt as a proportion of disposable income is declining with the ratio easing to 72.6 per cent in the second quarter 2017 from 73.0 per cent in the first quarter 2017 and 83.0 per cent in the first quarter 2010.”
In addition to reducing debt, household cash flow improved slightly in the third quarter with a 0.4 per cent year-on-year (y/y) gain after being virtually unchanged y/y in the second quarter. Transunion noted that real income is struggling to improve materially.
Household debt service costs declined by 5.2 per cent y/y in the third quarter because of household deleveraging as well as a reduction in the prime lending rate due to the SARB repo rate cut in July.
The report cited that a relatively stable rand has been an immense help in cushioning South Africa’s perceived instability among international investors, though it acknowledged that political uncertainty and sovereign credit rating downgrades were risks that needed to be watched closely in the coming quarters.