The SA Daily
13 August 2020
Retail sales still stuck
Shireen Darmalingam
- Retail sales for June have disappointed by falling by 7.5% y/y, after already having declined by a revised 11.9% y/y in May. June was the third consecutive month of declining sales despite the easing of lockdown restrictions in May and June. Retail sales also declined by 23.5% q/q in June, compared to a decline of 20% q/q in the three months to May. The trade sector therefore seems set to detract from GDP growth in Q2:20, just as it did in Q1:20.
- The COVID-19 pandemic has resulted in large negative growth in June from ‘other’ retailers (-46.3% y/y), retailers in food, beverages and tobacco in specialised stores (-11.0% y/y) as the alcohol and tobacco bans remain in place as well as retailers in textiles, clothing, footwear and leather goods (-7.6% y/y). Retailers will continue to face tough trading conditions as consumer confidence languishes. The BER’s consumer confidence index fell to -33 pts in Q2:20, from -9 pts in Q1:20. More significantly, the rating of the appropriate time to buy durables, such as motor vehicles, remains low despite low interest rates. In addition, consumers expect their finances to deteriorate further over the next year.
- Most sectors re-opened in June, but we expect household consumption expenditure (HEC) to remain under pressure in H2:20 as consumer spending will be constrained by the adverse impact of the pandemic on income, jobs, asset prices, and sentiment. Our forecast is for an economic contraction of 8.5% this year, with HCE therefore likely to contract significantly in 2020 before recovering in 2021. We pencil in a 10.5% y/y HCE decline in 2020 and a recovery to 6.5% y/y in 2021.
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