THE Reserve Bank's decision to keep interest rates unchanged, coupled with the anticipated Eskom electricity tariff hikes, will not aid a recovery in the retail sector much, analysts and economists warned yesterday.
They were responding to the September retail trade sales figures released by Stats SA yesterday, which showed a -5,1percent year-on-year decline from a revised -6,5percent drop in August. This was the eighth successive decline in eight months.
Absa Investments analyst Chris Gilmour said the figures were "bleak" when only looked at on a year-on-year basis, but there was a slight improvement on the quarter-on-quarter basis.
He said there were other factors that contributed to the decrease in consumer spending.
"The massive price effect from Eskom in the past two years, amounting to about 30percent, coupled with the introduction of the National Credit Act, helped dampen consumer spending."
Investec Group economist Annabel Bishop said over the last two quarters SA's exports contracted by 4percent and 14percent, and without these contractions, and drop-off in imports, SA would not have "plunged" into recession.
She said the Reserve Bank's vigorous interest rate tightening exercise of 2006, 2007 and 2008 did not contribute to the slowdown in SA, as monetary policy works with a lag of up to two years on economic activity.
"But it proved to be very bad timing, as the combination of the collapse of global trade volumes, caused by the credit crisis late last year, has seen SA record its first recession in 10 years," Bishop said.
"We still expect conditions to remain challenging for retailers in the coming months as the sector remains in recession this year."
SA Trade Union spokesperson Patrick Craven said the Reserve Bank's decision of not cutting interest rates was unfortunate.
"These retail stats confirm Cosatu's view that we are getting deep into recession and it makes it important to pursue policies that will create and save jobs."