Retail trade sales improved markedly in December

Growth in real retail sales, though negative for the eighth consecutive month, improved markedly in December. Real retail sales for December registered a -0.1% contraction compared to a year ago, whereas the similar number for November was -4%. This was the best performance since April when sales grew by 0.2%. In nominal terms, retail sales grew by 12.1% compared to 10.7% in November. For the year, retail sales contracted 2.2%.

Retail inflation continued its downward trend to 12.3% in December compared to 15.3% in November and the high of 17.7% in August. Average retail inflation for 2008 was 13.3%, almost double the 6.9% of 2007.

Detail sales for December were supported by the sharp drop in fuel prices, bonus payments, the drop of 50 basis points in the repo rate and declining inflation. Initial anecdotal indications point towards another strong sales month in January.

Though the fuel price increases since February will negatively affect retail sales going forward, the reduction of one percentage point in the repo rate in February, as well as the income tax concessions of R13.6 billion, which will take effect on 1 March, will support retail sales in the first quarter. More interest rate reductions will support sales through the rest of the year, but retrenchments will work against a huge improvement in retail sales in 2009.

Regarding specific retailing groups, the lack of inflation adjusted (real) and seasonally adjusted numbers make analysis difficult. However, using CPI statistics, it would seem that general  dealers and retailers selling food, beverages and tobacco registered marginal positive real growth, while sales of pharmaceutical products and textiles did better. Those selling household furniture and hardware, however, had another negative month in terms of real growth.