SA retail trade sales down 1.4% y/y in May

South Africa's retail sector continues to face challenges as retail sales volumes declined by 1.4 per cent year on year in May, marking a sixth consecutive month of annual decline. The data, worse than Reuters' consensus expectation of -1.1 per cent, reflects the ongoing economic pressures in the country. Siobhan Redford, Economist at RMB, joined CNBC Africa to analyze the impact of these declining sales figures. Redford highlighted the struggle of retailers with issues like load shedding, which increase their costs, and the impact of higher interest rates on consumer spending. Despite the overall decline, there were some bright spots in certain sub-sectors, such as clothing, textiles, footwear, and leather goods, which saw a significant increase of 10.3 percent year on year. This growth can be attributed to consumers gradually returning to normal activities, restocking their wardrobes, and preparing for winter. The contrasting performance of different sectors indicates the varied impact of economic challenges on retailers. Redford noted that while clothing and footwear are typically considered discretionary purchases, they continue to show growth, suggesting evolving consumer behavior and preferences. Companies like Pick n Pay have played a role in shielding consumers from the worst effects of inflation by keeping internal inflation below CPI. This strategy aims to maintain consumer affordability and support economic viability for retailers. Looking ahead, Redford expressed caution about expecting an immediate improvement in retail sales. While some cost pressures like fuel prices are easing, food price inflation remains high, impacting consumers' purchasing power. Additionally, the rapid increase in interest rates poses a challenge to retailers as consumer spending on discretionary items is likely to remain subdued. Despite expectations of moderation in inflation, the retail sector is likely to continue facing difficulties in the near term. The sector's performance will be closely tied to broader economic conditions and consumer confidence in South Africa.