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Retail sales

Recent predictions by Avior, an independent equity research firm, that retail sales growth may soon go into negative territory are starting to look credible.

Before this forecast, sales of big-ticket item such as houses and cars had already fallen. Since then furniture sales have followed, fundamentally changing the “slowing growth” mantra that trailed behind the country’s greatest retail boom.

Woolworths’ clothing sales have also gone into decline and Edgars Consolidated Stores (Edcon), the owner of Edgars, is not faring much better. For once the trend is not Edcon’s friend.

Negative growth in sales in the wider clothing retail sector will mean that retail has entered a phase of real trouble. Predictably, jobs will be threatened.

And now residential building renovations in the cities are also starting to falter, according to Statistics SA.

Although this is not unexpected, it is worrying. This is because alterations are a kind of “buying down” that benefits building materials retailers, especially after house sales also joined the downward trend.

Granted, homeowners will never stop tinkering with their homes on Sunday afternoons, making even the smallest of renovations, which will keep some money trickling into hardware stores.

But the familiar, though dreadful, piles of building sand and bricks on pavements may soon disappear. And not because there is a shortage caused by large-scale building elsewhere. Retailers such as Italtile and On-Tap will be watching these stats closely.

So how did this boisterous party end up in a hangover, albeit a mild one for now?

The answer is simple enough: the country’s longest period of economic growth was accompanied by easy access to credit.

Although Reserve Bank governor Tito Mboweni is not the favourite of many these days, he must be commended for his early intervention. If he had not started raising interest rates as early as he did and if the National Credit Act had not unwittingly put a brake on housing prices, things could have been catastrophic, with bond prices higher than the value of houses, leading to our own subprime crisis.

Food retail sales are still doing well, propped up by the bottom-end consumers. Shoprite and Spar are still pumping. And it isn’t just low-margin mielie meal these customers are buying. You don’t need to be a rocket scientist to realise that everyone has to eat, and when the going gets tough, furniture and cars always get hit first.