Retails Sales Growth Moderated To 10.4% Y/Y In June

  • Market Overview

Retail sales volumes growth moderated to 10.4% y/y in June 2021, from the lockdown-induced spike of 16.3% in May (revised up from 15.8%), reflecting diminishing base effects. Year-to-date, volume sales are 12.8% higher compared to the same period in 2020, and 0.9% higher compared to 2019. Encouragingly, month-on-month seasonally adjusted sales volumes, which is a more meaningful measure under the circumstances and crucial for the calculation of quarterly GDP growth, increased by 0.6% in June, following an uptick of 2.3% May (revised up from 2.1%), and a decline of 0.5% in April. This suggests a quarter-on-quarter seasonally adjusted volume increase of 0.7% in 2Q21, much lower than the 1.8% q/q increase in 1Q21. The third wave of Covid-19 infections, termination of fiscal support to vulnerable households and a decline in consumer confidence likely contributed to the deceleration in shopping activity in 2Q21.

Retail sales outlet performance

The strong year-on-year growth was largely driven by General dealers (contributing 6.1 percentage points [ppt]), followed by all Other retailers (2.6ppt) and Textiles, clothing, footwear and leather goods retailers (0.8ppt). Household furniture and Hardware material retailers, which led the rebound in retail sales in 2H20 and into 1Q21, were the worst performers in June, contributing -0.1ppt and 0.0ppt respectively. This indicates that the home-improvement drive, which was driven by the greater adoption of working from home due to the pandemic, may be slowing. Elsewhere, mortgage demand indicators suggest that home-buying activity may also be slowing, and thus offering less support to demand for new furniture.

Outlook

Looking ahead, near-term retail sales should continue depicting abnormally large year-on-year growth swings due to last year’s base effects, although at a diminished rate. However, the third wave of Covid-19 infections and the subsequent implementation of harsher lockdown restrictions likely curtailed retail sales performance in July. This will be exacerbated by the recent riots in KwaZulu-Natal and some parts of Gauteng. Nevertheless, the reinstatement of the Social Relief of Distress (SRD) grants to vulnerable households and the Temporary Employer/Employee Relief Scheme (TERS) to workers affected by the lockdowns and riots, combined with the continued improvement in consumption credit uptake (credit cards and general loans), should provide much-needed support in the near term. However, these must be weighed against the souring consumer sentiment and the slow readjustments in the labour market.

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