Retail sector recovery ‘on track’

17 September 2010

Business confidence among South African retailers improved in the third quarter of 2010, says the Bureau for Economic Research (BER).

“The results indicate that the recovery in the retail sector remained on track, although areas of weakness persisted,” the Stellenbosch-based BER said on Thursday.

Confidence among retailers grew by 14 index points from 38 to 52, meaning that the index almost reversed all of the losses seen in the second quarter.

Survey shows ‘mixed results’

The BER added, however, that the survey had shown mixed results.

“According to Statistics SA, the volume of retail sales increased by 4.9% year-on-year during the second quarter. The BER’s retail trade survey indicated that the growth in sales subsided during quarter three,” it said.

The majority of respondents said that sales volumes were lower than a year ago. This is while a lack of pricing power put further pressure on retailers. A majority of 16 percent of respondents indicated lower rates of increase in average selling prices.

“These lower rates of increase in selling prices, together with the lower growth in sales volume, adversely affected retailers’ overall profitability” said BER economist Craig Lemboe.

During the third quarter, the semi-durable goods sector – which comprises mainly clothing, footwear and textiles – performed impressively. The non-durable (food, beverages and toiletries) and durables (furniture, household goods and jewellery) sectors weakened unexpectedly.

This as durable and non-durable goods traders indicated that the growth in sales volumes and the pace of average selling price increases was much slower than anticipated on quarter two.

Wholesale trader confidence

Additionally, in the third quarter wholesale trader confidence increased by three index points to 50 – the same as that of the first quarter of 2010.

“The rise in business confidence was mainly driven by the consumer goods sub-sector, which includes goods such as textiles and clothing, footwear, food, beverages and tobacco, household requisites and pharmaceuticals,” said Lemboe.

The BER said that business confidence among new vehicle traders rose by 30 index points to 79, which exceeded expectations. “This to a large degree explains the steep rise in business confidence.”

Source: BuaNews