HomeBusiness DigestSA retail confidence falls to five-year low

SA retail confidence falls to five-year low

CONFIDENCE in South Africa’s retail sector tumbled to a five-year low in the first quarter of 2008, pointing to a further decline in sales volumes as higher interest rates bite, a new survey showed on Tuesday.

The Bureau for Economic Research (BER) retail confidence index dropped to 52, from 71 in the last quarter of 2007, showing only a small majority of retailers were satisfied with business conditions, and raising the risk the sector is heading for recession.
“Official retail sales statistics are not yet available for the first quarter of 2008, but the BER’s latest survey results suggest that retail sales volumes contracted further during the first quarter,” the BER said in a statement.
Annualised retail sales contracted by 0,5 and 0,2% in December and November last year. January data is due on Wednesday.
The survey results are in line with recent confidence indicators for business and manufacturing, which have also fallen sharply, as sentiment deteriorates on high interest rates and a chronic power shortage.
South Africa’s central bank raised its repo lending rate by 400 basis points to 11% between June 2006 and December last year, hitting consumer spending.
It left the rate unchanged in January on signs of slowing growth and amid energy problems, although inflation remains a serious concern.
Electricity utility Eskom is battling to meet demand, resulting in planned and unplanned outages that have caused havoc on roads and in shops.
The BER said the survey showed retailers of semi-durable, non-durable and durable goods sectors all reported lower sales volumes compared to a year ago, indicating pressures beyond those sensitive to interest rate changes.
“Apart from rapidly deteriorating sales growth, the decline in overall retailer confidence can also be ascribed to increasing margin pressure and plunging profitability levels, and possibly the negative sentiment provoked by the recent spate of power failures,” said BER senior economist Linette Ellis.
Prices were also rising, with selling prices for non-durable goods — which include food — surging to a 5-1/2 year high.
Ellis said the BER now expected real consumer spending to increase by between 2 and 3% in 2008, compared to an estimated 7% in 2007 and 8% in 2006. —Reuters. 

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