Consumers keep wallets in pocket

By Staff Writer

By Adele Shevel

Consumers are keeping a tight grip on their wallets as the tough economic conditions start to hit home.

According to figures from Statistics South Africa released yesterday, retail sales fell 1.7% in March from a year ago. This is the first year-on-year decline in 2008 and the sharpest decline since October 2000.

The monthly figures are a clear sign that consumers are tightening their belts, but analysts expect the Reserve Bank to remain unflinching in its commitment to fight inflation by raising interest rates again when its Monetary Policy Committee (MPC) meets next month.

If the MPC does raise rates it will be the 10th increase since 2006 — and talk is that there might be more to come.

Reserve Bank governor Tito Mboweni hinted strongly on Tuesday that rates would rise again, saying that price pressures had spread beyond food and energy and needed to be curbed.

Consumer demand has been the primary driver of economic growth for the past few years, with the retail sector contributing 14% to the economy.

According to Stanlib economist Kevin Lings, the March reading was worse than expected.

He said: “The basic concern is that since consumers are facing a range of bigger-than-normal price hikes, which impact more fully on non-discretionary spending, the amount of money available for discretionary spending will be substantially curtailed this year.”

These include the petrol price, debt-servicing costs, food prices, electricity tariffs, rentals, education, healthcare and municipal assessment rates.

Together these expenses account for about 65% of total consumer spending.

Lings said total non-discretionary spending was likely to be at least 16percent higher this year — assuming no change in volumes — including at least a 25percent rise in petrol price for the year, an average 13percent increase in food prices, and an average 20percent increase in electricity tariffs.

Absa Capital said retail sales data, together with slow vehicle sales and lacklustre manufacturing activity provided strong evidence of the Reserve Bank’s success in curbing consumption.

Meanwhile, supermarket group Spar posted a 24.8percent rise in operating profit to R496.2- million for the six months to March 30. Revenue was up 21.1percent to R13.06-billion.

Spar group CEO Wayne Hook said the favourable results were due mainly to strong volume growth in distribution activity and buoyant trading at the Spar retailer level.

Hook said food inflation, which averaged 10.3% in the period, spiked to around 14% in March, which was a worry.

He expects interest rates and fuel price rises will continue to dent consumer spending, but reckons Spar’s performance for the rest of the 2008 financial year will be satisfactory.

Recent Articles

Featured Can you afford an ambulance in South Africa?

When a loved one is straddling the line between life and death, you won’t hesitate to call an ambulance. This week, Justmoney found out how much an ambulance ride costs in South Africa, whether you can refuse to get into an ambulance, and who pays the bill if you’re unconscious. 

Read more

Discovery Vitality: The impact it had on my health

It’s nearly 30 degrees outside, but my windows are closed to prevent further wildfire smoke from entering my bedroom. I’m hopping around, squatting and lunging my way into my “cardio zone” so that I can earn 200 points on Discovery Vitality and meet my weekly activity goals.

Read more

Rand runs out of steam in lead-up to budget speech

For all the foreshadowing that was done last week in terms of the two big speeches by the head of states in the United States (US) and South Africa (SA), very little happened as a direct consequence thereof.

Read more

The cover you need at every age and stage

Insurance is often neglected during people’s twenties and inflated during their forties. So, which insurance products should you pursue at which age?

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

President Hotel Easter Special

Price: From R1,500
When: 15 March to 30 April
Where: Cape Town

Kulula-Preskil Island Resort Special

Price: R16,999
When: 11 May -14 September
Where: Mauritius

A Touch Of Madness Tuck In Tuesday Special

Price: R70
When: Tuesdays
Where: Cape Town