Retail sectors see ongoing improvements in sales – Christmas boom expected

Retail sales continue to improve as more confident consumers retreat from recessionary gloom and stores are expecting a Christmas boom after a sluggish December last year.

The strongest growth sectors at present are seen in those serving the construction and engineering sectors – a good marker for future growth and employment and vehicle sales – but professional services continue to see clients cut back.

Releasing the results of a SureSwipe survey across 25 retail sectors, Paul Kent (see pic), managing director of independent credit card swipe machine distributor, SureSwipe said: “We are seeing very encouraging growth some of our clients have doubled earnings since last year, but those remain in the minority, however, most sectors are steadily moving back into positive territory.”

The survey shows that the construction and engineering sectors lead the revival in consumer spend, after steady growth of around 10% this year, spending leapt to around 25% year on year in August. “This is a very good economic indicator,” Kent said, “these sectors employ significant numbers of unskilled and semi-skilled workers but too it shows that with banks released a stranglehold on lending and softer interest rates more a spending on new construction or renovation.”

But professional services saw a significant cut, with a 60% drop in spend for those services; these include services to medical professionals, lawyers, consultants and the like. “This is a worrying trend,” Kent said, “and we can anticipate that it will hopefully induce more competitive pricing for those services.”

Fashion spend which collapsed in July last year, rebounded significantly in the same period this year, with spend shooting up 50% - “but that could have also been a result of high tourist spend during the World Cup,” Kent said – it inched up only around one percent, year-on-year in August.

There is evidence that spend is down for most luxury items but for jewellery, “which is seen as an investment purchase,” Kent said. Jewellery sales rose 18% year on year in August and motor vehicles and sales of parts continued to track upward with a healthy 15% rise in sales in August year on year.

Hairdressers also saw more clients return with a 10% upsurge in sales in August compared to the same period last year, “we have noted that vanity purchases, such as hairdressers, may see a slight softening, perhaps with people getting their hair done every six weeks instead of every month, but that sector is reporting better sales. Our reps suggest too though, that more hairdressers have begun introducing incentives and special offers to attract clients and that seems to be having an impact too.”

Kent said that: “Home and leisure is down 10%, and hobbies and crafts down a similar figure compared to two years ago, but florists and nurseries are seeing much better sales – of around 9% more this August compared to last year, after a year of depressed sales.

“There is a very interesting trend in butchers, where sales have been on a persistent downward curve for the last two years, this has averaged at around three percent, but in August dropped 25%. It is impossible to say if it is because of healthier eating patterns as consumers eat less red meat or because of the recession. Certainly during the World Cup sales were buoyant.”

Sectors that see minor fluctuations but have remained essentially steady in 2009 and 2010 include furniture, food (other than meat) and beverages, health and fitness, health care (eg vitamin supplements), beauty spas, entertainment and spend on computer equipment.

“It is too early to herald that consumer confidence is definitely up but we, and our customers, are very optimistic that we may have come through the worst of the recession. There is a slow climb back up helped by the Reserve Bank cutting interest rates. Economic growth will not rebound fast, there are too many indicators here and overseas that we have to monitor, but we are quietly confident that business is slowly starting to rebound after two very tough years,” Kent noted. Inflation eased to an annual 3.7% in July, the slowest pace in more than four years, StatsSA reported at end August.

Household expenditure rose by an annualised 1,4% after dropping by a revised 1,9% in the third quarter of this year according to the Reserve Bank.

However,  First National Bank and the Bureau for Economic Research said last week that consumer confidence was close to the highest since the last three months of 2007. The FNB/BER consumer confidence index rose to 15 from 14 in the previous three months. Confidence among high-income earners, who earn more than R10 000 rand a month, improved as they rated it a good time to buy durable goods, such as TVs and furniture.

Consumer spending accounts for two-thirds of expenditure in the economy.