On an annual basis, retail sales rose 10.4% in June, compared to 16.3% in May and 95.7% in April. These numbers should all be taken with a big pinch of salt. April last year was the initial and toughest month of the lockdown, when only groceries and other essentials could be bought and the economy was in freefall. As 2021 progresses, expect year-over-year growth numbers to slow further.
On a monthly basis, retail sales rose 0.6% from June, a trend which FNB senior economist Siphamandla Mkhwanazi said was “a more meaningful measure in the circumstances and crucial for the calculation of quarterly GDP growth. It was also a moderation from May, when growth of 2.3% was recorded on a monthly basis after falling 0.5% in April.
“This suggests a seasonally adjusted volume increase of 0.7% in 2Q21, well below the 1.8% q/q increase in 1Q21. The third wave of Covid-19 infections, the end of Fiscal support for vulnerable households and a decline in consumer confidence likely contributed to the deceleration in buying activity in 2Q21,” Mkhwanazi said in a commentary on the data.
It also signals that demand pressures in the economy remain weak, which helps explain the moderation in inflation in July to 4.6% in July from 4.9% in June. Read here.
Speaking of July, this month’s retail figures are likely to be a train wreck due to the third wave of Covid infections, lockdown restrictions and the wave of looting and rioting in Gauteng and KZN .
“Looking ahead, retail sales, specifically the July figure, are expected to be a bumpy ride. The restrictions, especially the alcohol sales ban, will severely affect retail sales in the coming months. The recent riots and looting in Gauteng and KwaZulu-Natal will also have a massive impact on retail sales as stores have been ransacked and many retailers have decided to close shop for a few days,” said Pieter du Preez of NKC African Economics in a note.
Much of the nearly R120 million in cash that was stolen from banks and ATMs during the outbreak is likely to be spent and will therefore end up in retail coffers. But that will barely make up for the overall loss in sales volumes. DM/BM
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