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Standard Bank Group
The SA Daily 16 May 2019

Consumer headwinds

  • Sales in Q1 for the retail trade sector (comprising 48% of the total trade sector, and 6.5% of GDP) slipped 0.7% q/q seasonally adjusted, after growth of a mere 0.8% q/q in the, usually more robust, Q4:18. So, the retail sector has likely detracted 0.1-0.3 ppts from GDP, after both the mining and manufacturing sectors too failed to add to GDP in Q1. We therefore believe that GDP growth likely slipped at least 1.0% q/q seasonally adjusted and annualised in Q1.
  • This poor retail performance reflects SA’s weak economic fundamentals. Still, household consumption expenditure (HCE) should support our quite modest GDP growth forecast of 0.9% for 2019; we see HCE at1.3% for 2019 (1.8% in 2018). However, rising unemployment and moderating nominal compensation of employees (labour income, which is 80% of total household income) both pose downside risk to our forecast.
  • Nominal labour income has plummeted (see chart below) to 4.2% y/y in 2018 from 8.4% y/y and 7.4% y/y in 2016 and 2017 respectively; non-labour income (income from investment and social grants) has managed an average of 11.5% y/y in 2018 (9.9% y/y in 2017). The 237K q/q job losses in 1Q and the expected downside risk to employment growth implies that labour income will remain constrained.
  • However, the JSE All Share Index (linked to investment income) grew 4.4% q/q in Q1, which should support non-labour income.

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