Business

South Africa's March Retail Sales Slow To 2.8 pct

South Africa's retail sales grew below expectations by 2.8% year-on-year in March as rising interest rates and weak economic growth hit consumer confidence and dampened the sector's prospects. Analysts polled by Reuters had forecast a 3.6% year-on-year increase in March sales after a 4% expansion in February, but a sharp slump in the sales of food, beverages, cosmetics, furniture and appliances strangled growth. "Real retail sales growth will slow. They had a nice period of low inflation last year which boosted sales because it boosted real disposable income," said household and consumer sector strategist at First National Bank John Loots. "But the economic signs are there that the growth was out of touch with reality."

The South African Reserve Bank cut its growth forecast for 2016 to 0.8% from 1.3% previously, and has said it would have no choice to keep raising rates despite weak growth if inflation kept rising. On a month-on-month basis, sales inched up by 0.2%, and were up 3.4% in the three months to March compared with the same period last year, Statistics South Africa said. While consumer prices slowed in April, to 6.2%, analysts said the lower inflation may lead only to a temporary pause in the central bank's tightening cycle that has seen it raise rates 100 basis points in its last three meetings. "My expectation is that the retail sector should grow slower. We're expecting GDP in the region of 0.5%, so you cannot realistically expect retail sector to keep growing around 4%," FNB economist Loots said. The economy of Africa's most industrialised country has been hobbled by low commodity prices, drought and political ructions that have unnerved investors.