Flash Notes
Unsurprisingly and mainly due to the low base in April 2020, retail sales volumes (not seasonally adjusted) grew strongly by 95.8% y/y in April, following a 2.3% y/y decline in March. Worrying, seasonally adjusted retail sales, which are critical for the official calculation of quarterly GDP growth, declined by 0.8% m/m after declining by 4.5% m/m in March, marking a poor start to the second quarter. Together with the monthly growth moderation in the production data that Stats SA reported last week, this outcome does not bode well for 2Q21 real GDP growth. Our preliminary estimate is for real GDP growth to have moderated in the second quarter relative to the first quarter, and so far this dataset corroborates that view.
Overall, the poor monthly growth in seasonally adjusted retail sales should diminish given the continued monetary policy accommodation stance, tax relief measures provided at the February 2021 Budget Speech across most income groups and the delayed demand from last year's stringent lockdown measures. Financially robust high-income consumers (and to some extent middle-income consumers) should support consumer spending this year. We expect household consumption expenditure to rebound by 3.6% this year after declining by 3.5% in 2020.
The recent implementation of the level 3 lockdown restriction could partially derail retail sales performance, in particular at food and beverages outlets. However, we expect the negative impact to taper in the second half of this year, although the slack in the labour market implies that the overall recovery will be protracted.
Retail sales outlet performance
The strong year-on-year growth in retail sales volume was largely driven by textiles, clothing, footwear and leather goods sales growth, which contributed 34.5ppt. The second largest contribution of 17.8ppt originated from all "other" retailers; followed by hardware, paint and glass sales, which contributed 14.5ppt, and general dealers, which contributed 10.4ppt to overall retail sales growth. All seven categories of retail sales outlets posted positive year-on-year growth in April.
Figure 1: Solid year-on-year growth in retail sales off the low base in April 2020
Source: Stats SA, FNB Economics
Figure 2: April retail sales: 2021 in line with previous years, except 2020
Source: Stats SA, FNB Economics
