A mixed bag for retail outlook

Posted On Thursday, 02 February 2012 02:00 Published by
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Retail opportunities exist, says SA Shopping Centre Council – but beware the caveat - risk of another global recession

Low interest rates and rising disposable incomes could push retail sales in SA to 4.5% growth in 2012 – and even higher in 2013, according to the SA Council of Shopping Centres' (SACSC) Economic report 1st Quarter 2012 .

“Heightened profitability and the expectation of higher real wages will likely benefit the retail sector going forward,” says general manager Amanda Stops.

“But the big risk factor remains the eurozone and if that implodes, all bets are off.”

In the latest edition of their Economic Overview, the SACSC points to global uncertainties combined with rising unemployment and crippling strikes in SA as key factors hampering investment and damaging consumer confidence.

“Our base view is that economic growth in 2012 could be supported by a slightly weaker exchange rate,” the report says.

“But inflation is likely to remain a problem, along with the risk of increasing unemployment.”

Still the latest numbers are positive.

Retail sales growth increase 6.8% year-on-year in November 2011, says the report, with retailers of hardware, paint and glass seeing an uptick of almost 18%.

“Certain economic factors are especially important for the retail sector and highlight some key opportunities,” points out Stops.

Interest rates remain at their lowest levels in almost four decades, which has helped push overdrafts, credit card spending and personal loans to 12.6% growth year-on-year in November 2012.

“We’ve also seen installment finance – mainly for vehicles purchases and durable goods – grow by about 10% over the same period,” adds Stops.

A buoyant pace of spending on durable goods is also evident in the latest numbers on household consumption.

“That means households have been spending more on personal transport equipment, computers, and recreation and entertainment goods,” she explains. Households may be able to shop more thanks to an expected improvement in real wages, as well as overall lower household debt levels in SA – largely because of lower interest rates.

“Nonetheless, we are closely watching domestic employment levels, which are currently depressed,” she adds.

“And of course the big proviso is that the European economy doesn’t spark a global recession.”

Publisher: eProp
Source: SACSC

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