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October sales volumes underwhelm expectations, reverting to a contraction

Stats SA’s latest Retail Sales data commentary by Siphamandla Mkhwanazi, FNB Senior Economist.

Following the first expansion of the year in September, retail sales volumes reverted to contractionary territory, declining by 2.5% y/y in October. This was materially lower than the Reuters consensus expectation of a 0.9% increase. On a month-on-month basis, seasonally adjusted volumes fell deeper by 1.2%, from a marginal decline of 0.1% (revised down from a 0.1% growth). The setback likely reflects consumers’ delayed shopping decisions, in anticipation of Black Friday deals in November. Nevertheless, year-to-date volumes are 1.5% lower than the same period last year, underscoring the challenging consumer backdrop, with cost-of-living pressures weighing on consumers discretionary incomes.

Retail sales outlet performance

The decline was broad-based, as only one out of seven categories recorded an expansion in annual volumes.  The strong performance by Clothing and footwear retailers persisted, with a 7.0% y/y volume growth, contributing 1.2 ppts. Notably, however, the pace of growth halved from last month’s print. Dragging sales were General dealers with -5.7% y/y, detracting 2.4 ppts, Hardware retailers with -6.6% y/y and -0.6 ppts, as well as Other retailers with -3.7%y/y, detracting 0.4 ppts to the headline number.


In line with our expectations, sentiment indicators point to subdued consumer demand in 4Q23. The FNB/BER Consumer Confidence Index edged slightly lower to -17 index points in 4Q23, from -16 in 3Q23, the lowest festive season reading in more than 20 years. In the same breath, sentiment among retailers, although improved from 32 to 47 in 4Q23, shows the uptick to be driven by improvements in profitability and general business conditions (on the back of less intense levels of load-shedding at the time of the survey), rather than improved sales growth. In fact, retailers of durable and non-durable goods reported lower sales volumes compared to the same period last year, while semi-durable goods retailers continued to see higher demand. Combined, these suggest that consumers, particularly in high- and mid-income segments, will be cautious during this holiday shopping season, which should worry retailers of non-essential goods. Overall, we maintain our view of subdued growth in household consumption expenditure for the short to medium term.

Source: Stats SA, FNB Economics

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