Growth In Retail Sector Due To Consumers Paying More For Less


Retail trade sales have shot up 4,1% year on year and while one might assume this is because consumers are buying more, the real reason is because of how much food prices have gone up and that consumers have been paying a lot more for less, reports Business Day.

The data, released by Statistics SA, showed that the sales increase recorded for February had improved from January’s revised 3,6% increase.

“If you look at the total value of retail sales, it shows that people are not necessarily buying more goods. The prices of goods may be going up 10% and retail sales in value have gone up 4%, so that means that people are buying fewer stuff,” Ian Cruickshank, Chief Economist at the Institute of Race Relations, told Business Day.

He went on to say that retail sales included food and that these prices have shot up exponentially this year.

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“A bag of maize meal costs R30, while six months ago, it was R20. So, using maize meal as an example, people aren’t necessarily buying more bags, but the cost of what they have been buying has risen,” he said.

Senior Industry Analyst at FNB, Jason Muscat, also said that he would caution people against reading too much into the numbers. He brought up the fact that this year was also leap year, meaning that retailers had an extra day to trade, part of which is reflected in the increase in sales.

Annal Bishop, Chief Economist at Investec, is not impressed by the 4,1% year-on-year growth either, saying that the retail sector has seen much better in the past.

“Between 2003 and 2008, retail sales growth averaged above 7% year on year, indicating that today’s [Wednesday] outcome is not robust in this light. Furthermore, gross domestic product growth was 4,5% year on year on average over that period,” he said.

Bishop warned that retailers would probably start pushing up prices this year which, he says, will have a negative impact on retail sales growth.

Source: Destinyman

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