SA’s weak September retail trade sales point to possible recession

Black Friday is next week and retailers will be praying that South African consumers have been saving for it, because they have hardly been flocking to the shops.  

Stats SA said on Wednesday that retail trade sales had declined by 0.6% in the year to September after growing by a paltry 0.1% on a monthly basis. That added up to a 1.9% fall in the three months to the end of September, the second straight quarterly decline on the retail front. This increases the chances that South Africa’s economy fell into a recession after contracting by 0.7% in Q2. And if there was growth during the quarter, it would be tepid at best. 

The category “food, beverages and tobacco in specialised stores” saw an 8.1% fall in sales on an annual basis, suggesting that South Africans are not eating, drinking and merrily misbehaving as much as they have in the past. “Hardware, paint and glass” sales dropped by 8% in the year to September, which may signal that lockdown-inspired DIY projects have lost some of their appeal. 

Overall, soft retail sales can be explained by the usual suspects, including South Africa’s stagflationary environment of sky-high unemployment and high inflation, even if the latter may have peaked in July. Rising interest rates have also been curbing demand. The South African Reserve Bank has hiked its key repo rate by 275 basis points since last November, bringing the prime rate to 9.75%, and another increase is on the cards next week.