The business confidence levels of retailers in South Africa have retracted back into contractionary territory during the first quarter of 2024, despite an improvement in sales as perceived risks around the upcoming national elections weighed on sentiment.
Data from the Bureau for Economic Research’s (BER) latest Retail Trade survey yesterday showed BER’s retailer confidence index slumped back to 34 in the first quarter of 2024 – implying that only a third of the retailers surveyed by the BER were satisfied with prevailing business conditions.
“The decline in retailer confidence can probably be ascribed to the fact that profitability remained poor in the sector, but the perceived risks around the upcoming national election may also be weighing on sentiment,” the report noted.
Retail confidence had jumped from 32 to 47 during the 2023 festive season.
It said the dip in confidence came despite a slight improvement in seasonally adjusted retail sales volumes relative to the previous quarter, with the BER’s survey results pointing to low positive year-on-year growth in retail sales in 2024 quarter one.
“South African consumers are still shying away from big-ticket purchases, but retail sales of non-durables appear to have turned the corner, while clothing and footwear volume growth remains surprisingly resilient.
“Looking ahead, lower levels of load shedding, moderating food inflation and interest rate cuts, expected in July, should spark a more noticeable recovery in retail trade from the third quarter of 2024 onwards. But first, the political and economic risks around the 29 May national election loom large,” it noted.
The BER said non-durable and semi-durable goods retailers registered the largest upticks in volume growth, although profitability remained low.
Bar hardware retailers, all other retail categories surveyed by the BER reported somewhat better sales volumes during the first quarter. Non-durable goods retailers registered the largest uptick in volume growth, “no doubt supported by a further deceleration in food inflation and slower growth in restaurant and take-away spending”.
Textiles, clothing and footwear retailers reported that their sales volumes re-accelerated during the first quarter, after suffering from some post Rugby World Cup blues and underwhelming Black Friday sales in the fourth quarter.
“The fact that semi-durable goods retailers are still reporting robust volume growth – in the face of challenging economic conditions, and on top of two years of impressive growth – is a positive surprise,” it said.
Looking at durable goods, furniture and household appliances sales edged up slightly, but the sector remained under pressure from anaemic real disposable income and credit growth.
“Alarmingly, after a dismal festive season, the BER’s survey results suggest that hardware sales volumes plunged even further during the first quarter of 2024. Weak hardware sales correspond with the deterioration in residential construction activity in the building sector in recent months and ties back to high interest rates, cost-of-living pressures and low consumer confidence levels,” it noted.
BUSINESS REPORT