South Africa’s retail sales jump in May

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South Africa’s retail sales rose more than expected in May as sales of household goods, furniture and appliances expanded quickly.

The hint that pressure on consumers was easing ahead of an expected lending rate cut that may further support spending.

On Wednesday, Statistics South Africa said retail sales rose 2.2 per cent year-on-year, better than a Reuters forecast for a 1.6 per cent expansion. On a quarterly basis, sales rose 1.7 per cent.

Sales by general dealers were up 4 per cent followed by a 3.2 per cent expansion in the furniture and appliances category, and a 2.9 per cent increase in pharmaceutical goods, a sign consumers were more willing than before to spend on semi-durable goods.

Consumers’ finances have been under stain due to a prolonged period of weak economic activity, climbing unemployment, higher taxes and fuel price increases.

The weak economic activity stoked calls for the Reserve Bank (SARB) to reduce lending rates to stimulate spending.

The bank is set to cut interest rates by 25 basis points at Thursday’s meeting, a Reuters poll showed last week, while forward rate markets on Wednesday showed investors pricing in a close to 40 per cent probability of a cut by that margin.

The bank’s policymakers as well as some analysts, however, doubt whether rate cuts will have an impact on long-term growth even if they do boost consumer spending.

“A rate cut will assist at the margins but it will not drive an economic recovery. The nature of South Africa’s economic problems is fiscal in nature, not monetary,” said George Glynos, managing director at ETM Analytics.

The rand inched firmer following the data, trading at 13.9450 per dollar at early trading from an open of 13.9600.