SA retail sales expect to stabilise during 2nd quarter


Johannesburg – South African business confidence in the retail sector declined in the first quarter of 2007 but remained surprisingly robust despite higher interest rates, a new survey showed on Monday.

This was the finding of the latest Bureau for Economic Research (BER) Retail Survey, released on Monday. The survey was conducted between February 6 and March 6.According to the survey, sales volume growth is expected to stabilise during the second quarter of the year.

The Bureau for Economic Research (BER) retail confidence index fell to 87 index points from a record high 91 previously, indicating an overwhelming number of retailers remain satisfied with business conditions.

The slowdown was less marked than expected given the two percentage point rise in interest rates during the second half of 2006 and recent indications that retail sales may be beginning to moderate.The survey found sales volumes were expected to stabilise in the second quarter, meaning a further slowdown was not expected.

"This is certainly surprising as it may indicate that the lagged impact of last year's 200 basis point interest rate hikes is unlikely to weigh meaningfully on sales during the first half of 2007," BER economist Hugo Pienaar said in a statement.

Statistics South Africa figures indicate that retail sales volumes increased by 9.7% in 2006, equalling the increase recorded in 2004. While official statistics are not yet available for the first months of 2007, the BER said that its survey suggested that sales growth had eased somewhat in the first quarter.

According to the BER, growth in sales in semi-durable goods such as clothing and footwear posted the most significant slowdown, while durable and non-durable goods proved more resilient.

"The biggest surprise was in the case of durable goods where business confidence increased further to 89 index points from 87 during the previous quarter," the BER said.

"Like the respondents to the retail survey, the BER continues to be surprised by the strength and resilience of consumer demand in the wake of higher interest rates," Pienaar said.