The decision by the Monetary Policy Committee of the Reserve Bank to keep the repo rate in check at 3.5% seems to have had the desired effect, sparking consumer momentum, with retail confidence increasing by two index points to a seven-year high.
According to the Bureau for Economic Research (BER), third-quarter data has taken the index to 56 points, up from 54.
“At this level, sentiment is essentially above its long-term average of 39,” the BER said.
“While this is certainly a positive development, especially in the aftermath of violent protests and stricter trade restrictions amid a third wave of infections, this confidence was unfortunately not broad based.”
Going into greater detail, the Bureau said confidence was largely driven by non-durable goods (food and beverages) and hardware retailers on the back of improved sales volumes in these categories.
Retailers are however still facing a tough operating environment overall, improvements aside.
“Apart from the sales losses and destruction caused by the deadly riots and looting in KwaZulu-Natal and Gauteng, tighter lockdown restrictions amid surging Covid-19 infection rates at the start of the third quarter left consumers immobile, to some extent, and reluctant to visit malls and shopping centres.
“Furthermore, persistent global supply chain bottlenecks, which have led to stock shortages and higher input costs, continue to create an unsettling business environment for retailers.
“Several retailers have also flagged cash-flow problems and reduced earnings given South Africa’s weak labour market, while discretionary spending remains constrained among low- and middle-income earners in particular.”
