On a monthly basis, sales fell by 0.1% in July, which is effectively a stable figure compared to June. In the three months to July, sales fell 1.3%. The annual number was inflated by base effects resulting from the July 2021 riots.
So the data barely suggests a meaningful recovery in the sector, and it’s never a good sign for the wider economy when South Africans aren’t spending like drunken sailors.
“The loss of momentum in monthly sales volumes, more instructive given base effects, is consistent with mounting pressure on consumers’ discretionary incomes due to rising interest rates and the rising cost of life. July saw fuel prices rise by 2.57 rand, the largest margin ever. This would have hurt consumer confidence and their ability to spend on other goods,” said FNB Senior Economist Siphamandla Mkhwanazi in a note on the data.
“The resilience of consumer spending has been supported by robust growth in non-work related income, a continued decline in savings accumulated during the lockdown, as well as an increase in the use of consumer credit. Nonetheless, consumers are facing higher prices, rising interest rates and slow job growth, which could ultimately dampen recent spending resilience.
Consumer inflation is at 7.8% and the Reserve Bank is in an upward cycle that has already raised interest rates by 200 basis points. It is hoped that inflation will peak or approach its peak as oil prices have cooled lately, bringing much needed relief to South African consumers at the pumps. But rates are likely to rise further as the central bank is determined to stop inflation and protect the value of the fragile rand.
On top of all that, the economy contracted in the previous quarter and even if a recession is avoided, growth this quarter will be anything but robust. South Africans are not about to pass their way to prosperity. DM/BM
