February retail sales: Muted demand, even before lockdown

Retail sales for February lifted slightly, reporting year-on-year growth of 2%, according to data released by Statistics South Africa on Wednesday.

The main contributors to growth were "other" retailers, followed by household furniture or equipment and clothing and footwear. The "other" category includes online sales and demand driven by Valentine's Day, such as jewellery and watches, said FNB senior economist Siphamandla Mkhwanazi.

The February data does not take into account the impact of the lockdown, which was only instituted in March. The data shows retail sales decreased 0.4% in February, compared to January. With overall retail sales for the three months ending in February declining 1.1%.

Rising unemployment, slow income growth

"We note that retail sales inflation has not broken above the 3% mark in over 30 months. This depicts a muted consumer demand environment, and is consistent with rising unemployment, slowing income growth and depressed consumer sentiment," said Mkhwanazi.

Mkhwanazi expects March sales volume to spike, reflecting panic buying which gripped consumers ahead of the lockdown.

Mkhwanazi said that consumer spending may take a significant knock due to lockdown restrictions, loss of income and increased savings by high-income households amid uncertainty. "We expect a decline in household spending in the medium to longer term, particularly on 'non-essential' goods," he added.

In a report on the sales data, Investec economist Lara Hodes said that although households may have some relief from petrol price cuts as well as interest rate cuts of 2.25 basis points so far this year, with another one waiting in the wings at tomorrow's Monetary Policy briefing, this has been balanced out by growing unemployment, growing debt burdens and salary cuts.

"Many households are just struggling to survive," she said.

"Consumer buying patterns have shifted with a surge in online shopping observed, as many consumers are apprehensive about leaving their homes during the pandemic," Hodes added.