Growth in South African Retail Sales Slows in June 2018 but Remains Positive

South African retail sales for June 2018 grew by 2.9 percent year-on-year excluding the effects of inflation, marking the weakest pace of growth since October 2017. This is according to the Mastercard SpendingPulse June 2018 report, which provides a macro-economic analysis of retail spending trends in South Africa.

June’s retail sales volume was slightly below the three percent year-on-year gain recorded in May 2018 and signals the third consecutive month that the rate of growth has decelerated in South Africa’s retail sector. Total retail sales growth, including the effects of inflation, grew 5.8 percent year-on-year.

“While real spending in the retail sector remains in positive territory, we did see the rate of growth continue to slow in June. Retail price inflation also ticked up for the first time in a year, after bottoming out in May. This may further weigh on consumers in the coming months as they already face tight wallets due to weak wage growth and rising unemployment,” says Michael McNamara, Senior Principal, Data and Services at Mastercard.

“Slowing GDP growth in the first quarter, rising fuel prices and a strengthening US dollar also contribute to a challenging macro-economic environment,” McNamara says.

Clothing was the best-performing segment of the retail market in June, with sales excluding the effects of inflation rising 4.4 percent year-on-year. Overall, June sales were 8.4 percent above average for this time of year. Sales including the effects inflation were also up, growing 6.3 percent year-on-year.

The Pharmaceutical, Medical Goods, Cosmetics and Toiletry category once again performed well with sales excluding the effects of inflation growing 4.2 percent year-on-on-year for June 2018. Including the effects of inflation, sales grew 7.2 percent, meaning that inflation contributed only three percentage points to growth, compared to 3.6 percentage points in May.

In the Food and Beverages sector, sales excluding the effects of inflation grew 3.8 percent year-on-year in June, showing an improvement over the 1.5 percent growth rate of the first quarter in 2018. Sales including the effects of inflation grew 8.9 percent.

Confirming a trend evident in most months of 2018, the General Dealer sector once again underperformed the rest of the retail market. General Dealer sales volumes excluding the effects of inflation fell 2.9 percent year-on-year for June 2018. Including the effects of inflation, General Dealer sales rose 3.6 percent year-on-year.

“As the benefit from lower food and oil prices runs its course, growth in consumer spending is expected to face an additional headwind from a higher value-added tax, which increased from 14 percent to 15 percent in April,” says McNamara.

Mastercard SpendingPulse South Africa reports on national retail sales and uses aggregated and anonymous Mastercard transaction data, coupled with survey-based estimates for other payment forms including cash and cheque. Reports are released monthly to subscribers ahead of other sources, providing timely, accurate, and unbiased insight into the South African economy. The report also includes an overall retail sales and price index to illustrate whether spending growth is being driven by increased shopping, inflation or increased promotions.

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