In January the highest sales volumes were recorded since Mastercard SpendingPulse** started tracking South African retail sales trends in 2013. This is not surprising in the light of the record high Consumer Confidence Index (CCI) of 26 points recorded in the first quarter of 2018 – the highest level in more than a decade.
“The latest reading (CCI) surpassed the previous record high of +23 index points reached in the first quarter of 2007, when the South African economy pumped out real economic growth of nearly 6%,” FNB/Bureau of Economic Research (BER) said in a statement. For most of 2017 consumer confidence was negative, around -8 points, their report shows (see chart below).
The researchers attribute this confidence to Ramaphoria and a positive economic outlook for the next year. The economic outlook index jumped to +34 from -2. “The extraordinary improvement in consumer sentiment during the first quarter of 2018 can largely be ascribed to the change in the country’s leadership, which triggered many positive economic developments,” says Mamello Matikinca, chief economist at FNB.
Consumers responded to their renewed confidence in the economy by going shopping. In January overall consumer spending increased by 3.8% year-on-year without the effects of and by 7.3% with inflation. Inflation contributed just 3.5% points to overall sales growth, which is the lowest since 2013.
“January retail sales show an improvement in consumer discretionary spending, with South Africans benefiting from a moderation in inflation, a stronger rand, and some recovery in industries such as agriculture as production recovers from the severe drought,” says Sarah Quinlan, Senior Vice President and Group Head of Market Insights for Mastercard. “With 2017’s GDP growth exceeding expectations at 1.3% and improved business confidence, we are seeing a healthier economic outlook with a possibility of stronger wage and employment growth in the months to come.”
In February retail sales increased by 3.5% year-on-year without the effects of inflation (up by 6.8% with inflation), and its volumes are up by 4.6% on average compared to the previous five months of February. The impact of inflation was even lower in February, at just 3.3%.
“The strengthening of South Africa’s currency, which ended February 10.6% above its prior-year level vs. the US dollar, has helped to alleviate inflation pressures. Food prices rose in line with the consumer price index (CPI), after climbing faster than CPI for each of the past 28 months,” adds Quinlan.
In December, January and February, total retail sales grew 3.7% on average year-on-year without the effects of inflation – in 2017’s fourth quarter there was a 3.3% growth.
The local sporting goods industry is heavily reliant on imports and based on trade statistics from the Department of Trade and Industry (DTI), local distributors are expecting a much higher demand for sports equipment than a year ago. The Rand value of sports equipment imported over the December to February period grew 11% compared to the same three-month-period a year ago. In December, the Rand value of sporting goods imports grew a high 24%, with a solid 9% growth in January, but a low 1% growth in February.
Fishing equipment imports, however, dropped 12% over the December-February period, with the Rand value of fishing tackle imported in January dropping 22%. The value of imports in December was 5% lower than the previous year and in February 8% lower.
** The Mastercard SpendingPulse report uses aggregated and anonymous Mastercard transaction data as well as survey-based estimates for other payment forms, including cash and cheque.