SA retail sector set to improve in 2017

POSITIVE signs for the economy have increased hopes of improving trading conditions in 2017, leading to indicators pointing to improved conditions for the retail sector next year, says the South African Council of Shopping Centres (SACSC)

The “SACSC Economic Brief” listed the respite in the violent and destructive student protests, an unchanged credit risk ratings by Fitch and Moody’s, and political developments as some of the positive influences for the 2017 outlook.

The research brief quoted the latest EY/BER Retail Survey, which showed that conditions in the retail sector improved during the third quarter of 2016 after a sharp deterioration in the second quarter.

In a statement, SACSC chief executive Amanda Stops said improving economy had a positive impact on the retail sector.

“The SACSC economic brief highlights the direction the overall economy is taking and how this impacts retail and consumers. It adds to the useful and growing body of knowledge we commission and compile to guide and inform our members,” Stops said.

The SACSC research indicated that real household consumption expenditure growth in 2017 is forecast to amount to 1.7 percent compared with the estimated growth of 1.2 percent which would be recorded this year.

But researcher Christo Luüs noted that consumers’ real disposable remained under pressure, while high food price inflation was causing them to reprioritise spending on essentials.

Luüs said as a result, retail sales volume growth had slowed over recent months.

“Improved conditions were most notable in the non-durable goods category, signposting that people seem to be switching spend away from the durable and semi-durable sectors,” Luüs said.

“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 continue to rise, consumers’ purchasing power will be eroded.”

SACSC said semi-durable goods – mostly clothing and footwear – could experience an increase of only some one percent year-on-year in real terms in 2017 while durable goods expenditure – including furniture, appliances and private vehicles – could rise by around 1.5 percent.

SACSC is the official umbrella body of all involved shopping centres, including owners, developers, managing agents, brokers, professionals, retailers, marketers, service providers, financiers and researchers. –ANA