Retail sales inch up despite fears of withheld household consumption

Strongest increase in retail activity on record largely attributed to low base effect from lockdown

RETAIL sales surprised on the upside in April, accelarating to near pre-pandemic levels, but experts warned that household consumption could be dampened further by the new stricter lockdown restrictions amid rising Covid-19 cases.

Data from Statistics South Africa (StatsSA) yesterday showed that retail trade jumped 95.8 percent in April from a year earlier, boosted by textiles and clothing.

It was the strongest increase in retail activity on record, largely attributed to a low-base effect from last year’s strict lockdown measures which affected non-essential retailers.

This followed a downwardly revised 2.3 percent year-on-year decline in March, and below-market expectations of a 99.7 percent rise.

StatsSA’s deputy director for distributive trade statistics Raquel Floris said the year-on-year April retail sales growth was from a very low base.

“This may seem like a remarkable growth rate, but it comes off a relatively low base recorded in April 2020 when sales were severely constrained due to the national lockdown,” Foris said.

“On a month-to-month basis, the industry has recorded only one month of positive growth in 2021 so far.”

However, retail sales eased to 0.8 percent on a seasonally adjusted monthly basis after an upwardly revised 4.5 percent fall in March.

Retailers have recorded only one month of growth in this year so far as January sales fell 2.5 percent followed by a 7.7 percent jump in February, and a 4.5 percent slump in March.

FNB economist Thanda Sithole said there were worries about the poor start to the second quarter as seasonally adjusted retail sales were critical for the official calculation of quarterly GDP growth.

Sithole said together with the monthly growth moderation in the manufacturing production data reported last week, this outcome did not bode well for the second quarter real GDP growth.

“Our preliminary estimate is for real GDP growth to have moderated

in the second quarter relative to the first quarter, and so far this dataset corroborates that view,” Sithole said.

“The recent implementation of the level 3 lockdown restriction could partially derail retail sales performance, in particular at food and beverages outlets. However, we expect the negative impact to taper in the second half of this year, although the slack in the labour market implies that the overall recovery will be protracted.”

On a quarterly basis, StatsSA said retail trade sales increased 2.2 percent in April compared with the previous three months.

Investec economist Lara Hodes said a variety of risk factors could still affect household consumption and impact on the expected economic growth.

“More restrictive lockdown measures, the still insufficient vaccine rollout, electricity supply constraints and the high rate of unemployment all provide a combined risk to household consumption expenditure and to economic growth,” Hodes said.