South Africa’s December retail trade sales expanded 0.9% year-on-year, more or less in line with expectations. As had been expected, the month-on-month number dropped sharply, falling -2.3% on a seasonally adjusted basis, largely as a result of preemptive Christmas shopping taking place in November, particularly on Black Friday.
Clothing sales were the dominant driver of the expansion, growing at 10.5% y/y despite stricter lending criteria. Food and beverage sales also quickened to 7% y/y, while pharmaceutical and hardware sales registered growth of 2.1% and 4.1% respectively. Sales from general dealers contracted -3.8%, while furniture sales declined -6.2%, offsetting much of the impetus from the semi-durables sector.
The varying performances across the segments continue to reflect household strain, with consumers seemingly opting to purchase clothing as gifts, rather than more expensive durable goods. Based on today’s number, retail GDP is expected to have expanded 1.1% in 2016, adding 0.2% to GDP growth, but weaker mining and manufacturing data out last week suggest that overall 2016 GDP could come in slightly weaker (0.3%) than our forecast of 0.4%.
The data at hand thus far also hints at a fourth quarter contraction, although we don’t think a second consecutive contraction in 1Q17 will signal a recession. Our forecast for 2017 is for a modestly better year for South African consumers, as we forecast interest rates to remain steady, and inflation to drift lower and back below the 6% upper target band by 4Q17.