Retail sales show recovery is going on

• Glimmer of hope for consumers contending with tightening of coronavirus restrictions

Retail sales surged in April, adding to signs that a recovery from the economic devastation caused by Covid19 in 2020 is continuing, even as a third wave of infections raises fresh concern about whether its momentum can be sustained. That may offer a glimmer of hope to pandemicweary consumers facing a midwinter spike in infections.

Retail sales surged in April, adding to signs that recovery from the Covid-19 economic devastation is continuing in 2021 though a third wave of infection raises concern about whether momentum can be sustained.

That may offer a glimmer of hope to pandemic-weary consumers facing a midwinter spike in infections that prompted the government to tighten restrictions in an attempt to curb the spread of the virus.

Sales at SA retailers rose 95.8% year on year in April, up from a revised 2.3% contraction the previous month, Stats SA said on Thursday.

Even so, that was still lower than the expected 99.7% increase predicted in a Bloomberg survey of six analysts polled before the figures were published.

Seasonally adjusted retail trade sales decreased 0.8% in April 2021 when compared with the previous month’s.

“Yes, the retail sales data was slightly lower than expected, but if you compare them to a threeyear average excluding 2020 then they were not bad at all,” said Nicky Weimar, an economist at Nedbank.

“The recovery is continuing, but the key here is whether the virus can be contained and the degree of restrictions that will require. If we can avoid level four or level five restrictions being imposed then the recovery will stay on track.”

President Cyril Ramaphosa moved SA to level 3 restrictions on Tuesday night as rapidly rising infections threaten to derail the fragile economic recovery from 2020’s dramatic 7% slump in GDP, which was the worst fall in 100 years.

With the spectre of 2020’s level 5 restrictions still fresh in retailers’ minds, they will be hoping the country can avoid a return to the hard lockdown that shut restaurants and taverns for months and emptied shopping centres and malls.

April’s surge in retail trade was led by sales of textiles, clothing, footwear and leather goods along with hardware, paint and glass, household furniture as well as appliances and equipment. That may be a sign of consumers channelling their spending towards personal items, home décor and renovations as lingering restrictions to contain Covid-19 continue to curb demand for travel and entertainment.

“There’s some pent-up demand for durable goods as well as nondurables likes shoes and clothing. but lower interest rates also play a role as a lot of those items are bought on credit,” said Weimar.

The Reserve Bank lowered its benchmark interest rate 300 basis points in 2020, with 275 basis points of cuts coming since the onset of the pandemic, in an effort to bolster the economy.

Even so, annualised retail sales contracted for 10 months running from April 2020 to January 2021 as the effect of the pandemic dampened sentiment and discouraged consumers from visiting shops and malls.

SA had enjoyed positive retail sales for most months in the three years before 2020 despite a moribund economy that struggled to achieve positive growth. Even before the arrival of Covid19 last year the economy grew only 0.2% in 2019, 0.8% in 2018 and 1.4% in 2017. While the Bank and the Treasury have indicated that GDP will return to prepandemic levels only in 2023, economic growth in the firstquarter of 2021 beat the expectations of most analysts by coming in at 4.6% as household spending recovered and mining output rose. That prompted a flurry of updates to economists’ fullyear growth forecasts, with most predicting a moderately better outcome than the Bank’s estimate of 4.2% GDP growth for 2021.

“The long-term outlook for the economy will depend on wage growth and whether the economy can create jobs,” said Weimar. “Wages in the public sector will settle at much lower levels than in the past.”