Confidence in the retail and wholesale sectors has soared in South Africa in the fourth quarter of 2020, following the blow from the Covid-19 lockdown in the second quarter and the start of a recovery in the third quarter.
This was revealed in the latest Retail Trade Survey by the Bureau of Economic Research (BER), published on Thursday morning.
“After crashing to a 29-year low of 11 in the second quarter of 2020, retailer confidence soared remarkably from what seemed to be an upbeat 36 in the third quarter, to 50 in the fourth quarter,” the Stellenbosch-based agency said.
The BER also noted that wholesale confidence climbed from 33 to 59 – a six-year high – supported by a sharp increase in spending on consumer goods, while motor dealer confidence surged to a two-year high of 41 as sales continued to recover in the fourth quarter.
“The overall BER Trade survey results were quite positive in the fourth quarter. This upbeat performance was not only significantly better than pre-crisis levels, but also contributed immensely to the overall optimistic RMB/BER Business Confidence Index (BCI),” said the research unit said.
“Major improvements can be seen across all trade categories, with retailer, wholesaler and new vehicle dealer confidence all increasing remarkably on the back of improved operating conditions, a noteworthy uptick in sales volumes and an overall improvement in profitability,” it pointed out.
Despite massive gains in sentiment, the BER said that questions remain around whether the retail sector can sustain this momentum.
“Looking ahead, while the 2020Q4 survey results are encouraging, it is unclear whether the trade sector can sustain this upbeat performance. Significant risks lie ahead, especially with the expiration of the top-up social grants and Social Relief of Distress Grant early next year, which will wipe billions away from consumer incomes, and hence, the trade sector,” it noted.
“Secondly, Covid-19 infection rates appear to be resurging in the Western Cape and the Eastern Cape. Renewed lockdown restrictions to curb the spread of the virus would be devastating to the trade sector during the festive season.
“Thirdly, poorer-than-expected Black Friday and festive sales should not be ruled out, amid virus fears and a weak Covid-19-induced labour market,” it added.