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Retail sales suggest economy sluggish before May vote

Weak income growth alongside price pressures constrain consumers.

Sluggish retail sales for a second straight month pointed to lingering weakness in the South African economy, confounding President Cyril Ramaphosa’s efforts to lift growth before next month’s national election.

Retail sales rose 1.1% year on year in February versus 1.2% growth the previous month, official data showed on Wednesday. That was higher than expectations for a 0.6% increase but still far below levels needed to meaningfully lift this year’s economic growth rate.

“Data across the economy were very poor when measured at the quarter-on-quarter rate that aligns with official gross domestic product,” analysts at Capital Economics said in a note. “We think conditions will pick up later this year, but risks to our 1.5% 2019 growth forecast are weighted to the downside.”

Ramaphosa, who is trying to revive voter confidence in the governing African National Congress (ANC) party, has staked his reputation on reviving Africa’s most industrialised economy.

During his campaign for ANC leader more than a year ago he spoke of the need to lift the growth rate to 3% in the short term, but 2018 growth came in at just 0.8%.

The ANC is expected to hold onto its electoral majority next month, but the longer the economy remains in the doldrums the harder it will be for Ramaphosa to speak of an economic revival.

“If you look at the three month average for retail sales it actually contracted. That’s worrying. Consumer spending is struggling to pick up and we see that continuing throughout the year,” said Nedbank economist Johannes Khosa.

Explaining the pressure that South African consumers are under, data on Wednesday also showed consumer price inflation ticked higher to 4.5% in March from 4.1% in February, owing mainly to higher fuel prices.

That leaves inflation at the midpoint of the central bank’s 3% to 6% target range, where the bank wants to see price growth anchored. But it is a burden for ordinary South Africans who have laboured under high levels of unemployment and weak income growth for many years. 

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