Retail sales drops for 5th month
Nov 17 2008
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South Africa's retail sales fell for the fifth month running in September, official data showed on Wednesday, pointing to depressed consumer demand and raising chances of an early interest rate cut.

Statistics South Africa said September's retail sales shrank by 5.0 percent year-on-year at constant prices, from a slightly revised fall of 5.6 percent in August. Retail sales for the third quarter fell 5.1 percent year-on-year.

Consumer demand has spurred economic growth in the past four years to an average 5.0 percent, but higher inflation and a series of interest rate increases have helped slash household spending. The central bank left the repo rate at 12.0 percent in August and October, after raising it by 500 basis points between June 2006 and June 2008 in an effort to arrest inflation.

Inflation appears to have peaked, though, and most analysts expected the next move to be down.

The targeted CPIX inflation slowed to 13.0 percent year-on-year in September, after hitting a record high of 13.6 percent in August. Analysts said retail sales are unlikely to recover in the next few months on the back of a bleak economic outlook.

Analysts said the Reserve Bank may have to cut rates sooner than previously expected. The rand extended losses on Wednesday after the data was released, slipping to a two-week low of 10.4733 against the dollar and bringing to losses this year to almost 35 percent.

A weaker rand was identified by the central bank as the biggest threat to the inflation outlook and may delay any reduction in borrowing costs.

Adapted from Source: www.moneyweb.co.za, 12 November 2008