South African retail sales rise 7.7% in January

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Stats SA reports that retail sales in South Africa increased by 7.7% year-on-year in January 2022.

The main positive contributors are retailers of: food, beverage and tobacco products in specialized stores (70.9% and contribution of 3.5 percentage points); and textiles, clothing, footwear and leather goods (17.4% and contribution of 3.0 percentage points).

Weighing in on the Stats SA announcement, FNB Senior Economist Siphamandla Mkhwanazi said: “Apart from the spike in growth in food, beverage and tobacco volumes driven by base effects (70.9 %y/y), higher volume sales once spearheaded growth in apparel and footwear, which rose 17.4% year-on-year, following a 16.4% rise % in December (revised up from 15.2%) January volumes were likely supported by back-to-school buying.

“We expect the upward trend in apparel and footwear sales to continue, albeit at a slower pace, as mobility continues to improve and workers slowly return to the scene. Conversely, computer hardware continued its downward trend, recording -10.6% y/y in January, in line with the decline in the home improvement campaign.

Seasonally adjusted retail sales rose 1.5% in January 2022 from December 2021. This follows monthly changes of 1.7% in December 2021 and 1.7% in November 2021.

“Factors such as increased consumer mobility, improved credit utilization, the extension of government support subsidies and the relatively strong recovery in disposable income have remained broadly supportive of volume sales in recent months. However , we are concerned about increasing consumer headwinds,” the economist commented.

Consumer headwinds intensify

Mkhwanazi added: “Notwithstanding the partial support for household spending provided by the extension of the government subsidy to low-income households, and the slight improvement in the use of consumer credit (credit cards and general loans) by high-income segments, we are concerned about intensifying consumer headwinds.

“These include higher inflation (especially food, transportation and utility costs), depressed consumer sentiment, a sluggish job market and a less favorable interest rates. These are accentuated by escalating geopolitical tensions and put downward pressure on consumer spending.”

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