Glimmer of hope for retail sales

RETAIL sales contracted in July due to the impact of previous interest rate cuts, adding to arguments for the Reserve Bank to leave rates unchanged this week.

RETAIL sales contracted in July due to the impact of previous interest rate cuts, adding to arguments for the Reserve Bank to leave rates unchanged this week.

Stats SA said yesterday July retail sales fell by 3,9percent on an annual basis, the smallest drop since January, compared to a 6,9percent decline in June.

In the three months to July, the key gauge of consumer spending contracted by 5,1percent compared to the same period last year.

Analysts had expected July retail sales to fall by 6percent year-on-year and said this was an indication that the worst may be over as previous rate cuts start filtering through to consumers.

"This is a better number that shows that we have seen the worst of this data and that monetary policy is going to have a positive effect in the consumer-driven data," said George Glynos, managing director of ETM.

"This suggests that policy makers need to hold off for another round to see if the monetary policy easing announced so far is having a meaningful effect," he said.

Supply-side indicators such as manufacturing and mining output data show that production decline has slowed. - Reuters

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