Shock fall in retail sales

SA's retail sales fell a shocking 4.5% in real terms in February from the same month a year ago, fuelling fears that SA is already in a recession and cementing the case for a further 100 basis points in interest rate cuts at the end of April.

The sharp decline in February followed an increase of 1.2% in January and a marginal decline in December. The performance in December and January had raised hopes that a bottom had been seen in retail sales.

But the latest numbers show that consumer confidence returned to the doldrums, despite a 100 basis-point cut in interest rates in February.

Stanlib economist Kevin Lings said the two main reasons for the retail sales decline were that consumers' incomes were falling in real terms, and that they were experiencing job losses.

He said credit card debt was a reliable indicator of consumer spending, and in February consumers had actually reduced their credit card debt.

"That's a rare event indeed, and is more indicative of the mood among consumers than the retail sales figures in December and January."

Lings said the better performance in December and January had been an anomaly. Consumers had probably felt buoyed by the fact that petrol prices had dropped sharply and the first interest rate cut had taken place. But this had been followed by job losses in 2009.

"Coming after very weak manufacturing figures, the February retail sales figures point to negative growth in gross domestic product in the first quarter.

"This supports the argument for another 100 basis-point cut in interest rates at the end of this month," Lings said.

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