Retailers have a brighter outlook

Optimism for better trading

Despite tight house­hold budgets and muted economic growth prospects, retailers and trad­ers are optimistic for an im­proved trading outlook this year, according to Consumer Goods Council of South Af­rica (CGCSA) chief executive Gwarega Mangozhe.

Mango zhe said consumers are still grappling with high debts which have affected dis­posable incomes available for day-to-day expenses, let alone to make big ticket purchases.

“January is normally a dif­ficult month for many house­holds due to the higher than usual expenses associated with festive spending and educa­tion expenses. Naturally, the low-income families are always the worst affected,” said Man­gozhe.

He said despite expecta­tions of a marginal recovery of household finances, many households would continue to face pressure this year be­cause of debt. He said council members’ focus was to provide value to consumers by improv­ing efficiencies and passing on the resultant savings to con­sumers through discounted and special prices on selected basic and non-basic products.

“We expect this trend to not only continue during 2017, but to become the norm as the com­petitive landscape is changing because cost-conscious con­sumers are now always search­ing for bargains.

“Overall, the CGCSA hopes for a better performance of the economy as output in key sec­tors such as manufacturing im­proves. The welcome end of the drought will, over time, have a positive impact on food prices and food inflation,” he said.

Mangozhe’s view was mir­rored by the South African Council of Shopping Centres (SACSC).
Amanda Stops, SACSC chief executive, said leading indicators pointed to improved conditions for retail this year.

Stops said according to research undertaken for the council, the latest EY/BER Re­tail Survey, showed conditions in the retail sector had im­proved during the third quar­ter of last year, after a sharp deterioration in the second quarter.

“The SACSC economic brief highlights the direction the overall economy is taking and how this impacts retail and consumers.”

According to Christo Luüs of Ecoquant, who conducted the research, improved condi­tions were most notable in the non-durable goods category. Luüs said consumers’ real disposable income remained under pressure, while high food price inflation prompted them to reprioritise spending on essentials. As a result, re­tail sales volume growth has slowed over recent months.

“Weak underlying con­sumer demand is flagged by weak job creation, slow dis­posable income growth, slow­ing credit extension and low consumer confidence levels. As retail sales inflation continues to rise, consumers’ purchasing power will be eroded,” he said.

“Growth in sales of discre­tionary items is expected to show further weakness in the early months of 2017, while growth in the sales of essential items is likely to slow.

Durable goods consumption may show somewhat stronger growth off a very low base,” said Luüs.
MMI Holdings’ economists Sanisha Packirisamy and Her­man van Papendorp said last week in their latest monthly economic and market snapshot that consumers are still unwill­ing to spend on big ticket items.

“In line with consumers anticipating a better outlook for the economy, households’ expectations of their personal financial position a year from now improved markedly.

2017 Could be the fourth year of per capita recession

The largest drag on the headline index was the un­willingness of consumers to purchase big ticket items such as furniture, appliances and electronic goods.

“The BER (Bureau of Eco­nomic Research) attributes the weak uptake of durable goods to subdued sentiment, rising interest rates, moribund credit growth and more expensive im­ported durable goods, thanks to previously sustained rand weakness.

“Elevated food prices have eroded real wage gains for low-income consumers, while financial institutions have tightened credit-lending con­ditions at this end of the mar­ket,” they said.
Debt Rescue chief execu­tive Neil Roets said the recent BankservAfrica Economic Transaction Index (Beti) re­port showed South Africans had seen their incomes decline in real terms for the past three years on average.

“All these indications sug­gest that 2017 could be the fourth year of the per capita recession. It seems sad that we have to be pessimistic at such a happy time of the year but the sooner consumers realise the economy is in trouble and tighten their belts, the fewer of them will have to come to us to bail them out by placing them under debt review,” said Roets.

He said many South Afri­cans who could barely make ends meet during the year were plunging themselves even deeper into debt during the summer holidays season by spending money on expensive holidays, often on credit cards or with money borrowed from money lenders at exorbitant interest rates.