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The SA Daily 15 August 2019

Retail likely buoyed Q2 GDP

Shireen Darmalingam

  • Statistics South Africa data for June retail sales shows growth in excess of expectations, at 2.4% y/y, from a revised May increase of 2.3% y/y (previously 2.2% y/y). Seasonally adjusted retail sales, which aligns with the official calculation of GDP, increased by 0.3% m/m, from 0.1% m/m in May. YTD retail sales growth improved by 1.7% y/y, but not quite matching the 2.4% y/y increase same time last year.
  • Retail sales grew 1.1% q/q in Q2:19, after a 0.6% q/q decline in Q1:19, likely contributing positively to Q2:19 GDP (GDP data for Q2 will be out early in September). The retail data, together with last week’s mining and manufacturing production data, indicates a GDP growth rebound for Q2:19 after the 3.2% q/q plummet in Q1.
  • Supported by household consumption expenditure, we’d expect GDP growth of 0.6% in 2019 and 1.6% in 2020 premised on concrete economic reforms — despite the abiding downside risks.
  • We are however cautious about the outlook for consumer spending. Our inflation forecasts (4.4% for 2019, 4.7% for 2020) provide some support for the expected real income growth. However, households’ nominal income could slow considerably due to the downside risk to employment and income in the wake of the widespread Eskom power cuts in Q1.

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