Is S.Africa’s food sales data starting to turn around? - CNBC Africa

Is S.Africa’s food sales data starting to turn around?


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Restaurant and coffee shop income was slower in the second quarter at 5.2 per cent. PHOTO: Wikipedia

This is according to FNB Home Loans household and property sector strategist, John Loos.

“The release of June food and beverage retail stats, for the restaurant and catering sector, points to ongoing growth weakness, a situation which has prevailed since mid-2013. This reflects the weakness in the economy and in purchasing power growth,” he said.

“However, a slight uptick in nominal sales growth may just point to a move towards stabilisation in this sector, after a very poor first half of 2014, where sales declined when measured in real terms.”

The total value of food and beverage sales by restaurants and coffee shops, fast food, take-away outlets and caterers, was estimated to have grown by 4.2 per cent year-on-year.

However, Loos indicated that this sales growth could also possibly be due to price inflation than to any real growth.

(READ MORE: S.Africa’s CPI reaches its highest in five years)

“The Consumer Price Index (CPI) year-on-year inflation rate for hotels and restaurants has been gradually ticking higher, from a low of 5.8 per cent as at May 2013 to 7.8 per cent as at June 2014,” he explained.

“Using this CPI index to deflate food and beverage sales to real terms, the real rate of change in food and beverage sales was negative to the tune of -3.3 per cent year-on-year in June, and still negative at -1.7 per cent using a three-month moving average.”

Caterers, where weakness remained most pronounced, declined by -1.9 per cent year-on-year for the three months to June while income from the take away and fast food sector continued to grow the fastest at 10.8 per cent.

“Food and beverage sales figures for the restaurant and catering sector are highly sensitive to economic conditions, and are thus one of the good cyclical indicators to monitor. In recent times, they have continued to point to a very weak consumer situation, but may be starting to indicate a gradual turn for the better looming,” said Loos.

“Aggregating the sales on a quarterly basis, and using the restaurant and catering CPI to convert into real terms, the second quarter of 2014 was the third consecutive quarter of real year-on-year decline in sales. However, from -2.6 per cent and -2.3 per cent real declines for the prior two quarters, the second quarter 2014 decline had receded to -1.7 per cent, suggesting that we may be slowly turning the corner.”

However, Loos added that the second quarter figures completed the picture of what was still a very weak overall retail situation.

(WATCH VIDEO: S.Africa's June headline consumer inflation treading water)

“Our Real Household Consumption Expenditure forecast for 2014 is 1.9 per cent, down from 2013’s 2.6 per cent, which would be the third consecutive year of growth slowdown. To achieve even 1.9 per cent for this year, it is crucial that we begin to see more concrete signs of a turn for the better in retail sales growth,” he said.

“This, in turn, is significantly dependent on economic output returning to ‘normal’, after severe strike-related disruptions in certain key industries in the first half of the year and the possibility that the economy was in a recession.”