Stronger than expected recovery in July retail sales

Following the ending of the platinum mining strike at the end of June, one might have anticipated an improvement in July retail sales. This, however, needs to be weighed against the absence of earnings on the part of workers involved in the metal workers strike which consumed the whole of July.

  • In the event, y-o-y growth in retail sales at constant prices recovered more strongly than anticipated, to 2.4% in July. This was even stronger than the 2.1% average growth for the first seven months of the year. At the same time, the recovery should be seen against a substantial downward revision of the June growth figures, from 0.0% previously, to -0.9% as published now.
    Retail sales growth recovered in respect of general dealers, dealers in food and beverages, textiles and clothing and furniture. In other words, the improvement generated by a return to work and income earning by miners seemed to be fairly broadly based.
  • There can be no doubt that consumer spending remains under pressure, but these latest figures confirmed our stated view that spending is not about to collapse any time soon. Real interest rates remain low and the growth of the middle-class continues to provide support for the sector. Furthermore, the figures tend to support our view that growth in unsecured loans to households is showing signs of bottoming out.
  • Measured crudely as the difference between growth at constant prices and growth at current prices, retail inflation shot up to its highest level since September 2009 in July, to 6.1%, from 5.7% in June. Together with news of higher than expected CPI inflation in August, these latest figures add to the possibility that the Reserve Bank will after all raise the repo rate by 0.25%.

Source: Econometrix 17/09/2014

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