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Consumers shop at Hyde Park Mall, Johannesburg. Retailers feel more optimistic after a stream of positive data. Photo: Timothy Bernard
Johannesburg - Retailers may experience a better festive season this year compared with last year, according to an Ernst & Young and Bureau for Economic Research (BER) quarterly retail survey released yesterday.
The survey suggests that sales growth has accelerated slightly during the current quarter relative to the fourth quarter of last year, when volume growth slumped to just 2.3 percent year on year.
Derek Engelbrecht, Ernst & Young’s retail and consumer products sector leader, said: “The results from the latest retail survey suggest that sales growth will be less buoyant [than] the robust rates recorded during the 2010 and 2011 festive seasons, but the growth in retail sales volumes should top the rather weak number recorded last Christmas.”
He pointed out that the recent uptick in employment, higher wage settlements and a welcome decline in the petrol price since September were the reasons behind the turnaround. “This has boosted disposable incomes and alleviated some of the downward pressure on the non-durable goods sector.”
The latest statistics from the Quarterly Labour Force Survey by Statistics SA showed employment rose by 308 000 workers during the third quarter, resulting in the official unemployment rate declining from 25.6 percent to 24.7 percent.
Engelbrecht added that retail volume growth might well have accelerated from 2.1 percent year on year in the third quarter to closer to 3 percent during the fourth quarter.
However, he noted that slow volume growth had been experienced by furniture and household appliances retailers. He said this sector had been hardest hit by the slowdown in unsecured lending. “However, sales of hardware products and semi-durable goods such as clothing, footwear, sporting equipment, CDs and toys remained healthy.”
Sales of non-durable goods such as beverages, groceries, food and cosmetics appear to have recovered from low levels recorded earlier in the year.
“Hardware retailers in particular appear to be limiting their price hikes in the face of severe upward pressure on input costs, in order to bolster volume growth. This sector is also deriving some benefits from the gradual recovery in the building and construction sector,” Engelbrecht said.
He added that although the growth in semi-durable goods sales volumes remained strong, rapidly rising input costs on the back of a dramatic depreciation in the rand exchange rate over the last two years had eroded profitability levels.
Furniture and household appliances retailers have experienced low volume growth. “Wounded by a substantial deceleration in unsecured lending and a sharp decline in consumer confidence levels, furniture and household appliances retailers have had a miserable year so far,” he said.
The slump in durable goods sales growth agrees with the latest findings from the FNB/BER consumer confidence survey, which showed that the majority of South Africans across all income groups regarded the present time as inappropriate to purchase durable goods.
The survey also showed that only 40 percent of respondents were satisfied with the prevailing conditions in the sector.
Engelbrecht said retailers remained cautiously optimistic that input cost pressures would ease, selling price increases would slow and volume growth would continue to mend during the first quarter of next year. - Business Report