Recession bites into retail

By Staff Writer

Statistics South Africa tracks the economy providing information to help decision making about economics. This applies to the people in charge of the economy and the rest of us who make up the economy. Stats always lag reality so often there is anecdotal evidence before the evidence, but the latest evidence is bleak with retail sales dropping this August by 7% compared to August 2008. The simple explanation is that there is simply less spending money going around and the shops are feeling that. So who was suffering the most?

 

  • Hardware, paint and glass fell 19.2%
  • Furniture, appliances and equipment fell 9.2%
  • Textiles, clothing, footwear and leather fell 6.4%

 

In a recession people tend to plan their budgets more effectively and cut back on non-essentials. The figures show a shift in spending patterns this way, the house might well look nice with a new lick of paint, and sure, a new set of tools might be great, but these are non essentials and will tend to sell slower under the economic conditions we face. Furniture and household appliances are a sector that have relied heavily on credit. Ellerines was bought by African Bank because they realised that fundamentally Ellerines was no longer a retailer but a credit provider.

The National Credit Act was designed to limit 'reckless lending' and prevent retail sales on credit to people who are at risk from default. Furniture sales have thus dropped. The clothing sector is also down as people forego that new party frock for a little bit of austerity and a nice home cooked meal. Some of the few sectors that rose conform to what you would expect. Food, beverages and specialist tobacco was up by 2.2%, whilst cosmetics showed the lipstick effect rising 3.4%. The lipstick effect is when women might splash out on a little luxury like a new lipstick but not on a whole new ensemble. Men's underwear sales are also more than likely flat.

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