World Cup win may have helped to save South Africa from a recession, new figures show
- South African retail sales in November were far stronger than economists expected.
- This was due in part to Black Friday, but SA's World Cup rugby victory also provided an unexpected boost to beverage sales, and consumer sentiment.
- It could have helped to save South Africa from a recession, though economists are not sure it was enough.
- For more stories, go to BusinessInsider.co.za.
In a rare bit of good news about the economy, the latest retail numbers from Statistics South Africa show sales far above what economists expected.
Retail sales for November 2019 jumped to 2.6% from a year before, after growth of only 0.4% in October. Economists expected only 1.5% in November, a Reuters poll shows.
The solid sales were due in part to Black Friday, with spending on clothing and shoes rocketing almost R5 billion between October and November, while sales of appliances and furniture were almost R1 billion higher.
But the biggest jump – of more than 6% – was in sales of beverages and food, which was probably due in part to the Rugby World Cup, especially in the run-up to and celebrations of South Africa’s triumphant final performance in the first week of November.
The rugby would have boosted beverage sales and the restaurant trade in particular, says Mike Schüssler of Economists.co.za.
While sporting events do not usually have a marked impact on economic growth, positive news associated with sport – for example, when South Africa was awarded the soccer World Cup in 2004 – has been shown to have bolstered consumers spending and sentiment in the past, he adds.
Last year the Shoprite group told Business Insider SA that sales at its Shoprite and Checkers stores picked up following the Rugby World Cup victory.
“Usually Black Friday signals the start of the all-important festive trading period, but this year (2019), partly thanks to the Bokke, Christmas definitely (came) early.”
The latest stronger-than-expected retail sales may have helped spare South Africa from another recession, says Schüssler.
“But it’s touch and go.”
The economy shrank by 0.6% in the third quarter, and another contraction in the last three months of the year would leave South Africa in a technical recession.
So far, economic data from the fourth quarter has not been encouraging, as load shedding made a return in December. It is not clear exactly how big the impact will be, however, given that some factories were already ratcheting down, says Schüssler.
But he cautions that the November retail number may be artificially strong because Statistics SA has not yet fully discounted the seasonal effect of Black Friday, which is a relatively new phenomenon.
Citadel economist Maarten Ackermann says the retail sales demonstrate that South Africa is still a two-speed economy, where higher-income consumers continuing to spend while poor consumers are struggling.
He expects that December will be a very poor quarter.
“The reality is that even if it’s a small positive, it will be way below population growth.”
Siphamandla Mkhwanazi, senior economist at FNB, expects that retail sales will have moderately picked up during the festive season as consumers took advantage of discounted pricing.
But looking ahead, persistent pressures on disposable income (via a weak labour market and higher taxes) and rapidly weakening credit scores mean a narrowing scope for consumers to take up more debt.
“These factors, combined with the deterioration in consumer sentiment, suggest a relatively tepid medium- to longer-term household consumption prognosis,” says Mkhwanazi.
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