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The SA Daily 14 October 2019

Spending still tight

  • August retail sales this week will shed some light on the consumer. Consensus sees retail sales volumes as having slowed to 1.7% y/y, from 2.0% y/y in July.
  • Year-to-date retail sales growth, at 1.6% y/y, has underperformed 3.3% y/y same time last year, largely due to pharmaceuticals and medical goods, cosmetics and toiletries; textiles, clothing, footwear and leather goods; household furniture, appliances and equipment and “other”. General dealer sales managed though to outperform modestly.
  • Consumers face headwinds such as a higher tax burden, rising fuel prices, and a weaker labour market. Confidence across consumers and businesses, including retailers, remains depressed, and consumers are therefore in limbo, delaying large purchases.
  • Nevertheless, consumer spending has partly been supported by benign inflation and modest growth in household credit extension. Prospects of a 25 bps rate cut at either of the two upcoming MCP meetings (November/January 2020) should also provide some consumer relief. We expect household consumption expenditure to slow to 1.3% y/y this year from 1.8% y/y in 2018, before recovering to 1.7% y/y in 2020.

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