Retail sales plummet

IAdele Shevel

IAdele Shevel

February's retail sales data all but confirms that South Africa is in recession, economists said yesterday.

Retail sales dived 4,5percent in February from the same month a year ago in real terms on the back of weaker consumer spending, according to Statistics SA.

This comes after weak manufacturing and mining data was released recently.

The bad data heightens expectations that the Reserve Bank will cut interest rates later this month at the next Monetary Policy Committee meeting.

February's sales follow higher than expected growth of 1,2percent in January. In the three months to February sales decreased one percent in real terms compared with the same period last year.

A tighter credit environment, job losses and consumer debt have weighed down on spending patterns.

Kevin Lings, an economist at Stanlib, said there was clear evidence that most aspects of the economy are under pressure, particularly the manufacturing sector and exports, which are linked.

These relate mostly to the dire global situation especially within developed economies.

He said there was no doubt that consumers are under pressure.

"On the whole, consumers have reduced their outstanding balance on credit cards in four of the five last five months, including February 2009," said Lings.

As a result, the rate of growth in credit card debt has slowed from 44percent year-on-year in the middle of 2007 to "a mere one percent year-on-year in February 2009".

Stats SA has changed the way it calculates real retail sales, which some economists say creates changes - though general trends remain in place.

Tough times are expected to continue this year, though the pressure should ease as inflation falls and interest rates drop.

The Reserve Bank recently said consumer spending declined in the third and fourth quarters of 2008 after a decline in real disposable income.

Spending has been knocked by five interest rate hikes between June 2006 and June 2008, though since December the Reserve Bank cut rates 250 basis points.