Improved sales volumes seen by food and beverage and hardware retailers in the third quarter of 2021 have pushed the increase in retailer confidence to a seven-year high, a survey by the Office of Economic Research showed on Monday ( BER).
Retailer sentiment, though not broad-based, for the quarter increased marginally by 2 index points to 56, which is significantly above the long-term survey average of 39 points. Sentiment for nondurables retailers (food and beverages) increased from 51 to 58 points and hardware retailers rose from 65 in the second quarter to 77 points in the third quarter.
“It’s a positive number, and I think it again reiterates that the underlying South African economy, though not in a great place, is much better than people thought a couple of months ago,” said Wayne McCurrie, portfolio manager at FNB Wealth. & Investments, Moneyweb said.
Reestablishment of fiscal support
The BER noted that the reinstatement of the government’s Distress Relief grant in August contributed to increased retailer confidence. The grant has the potential to increase the purchasing power of approximately eight million people who will receive the R350 each month.
The bureau says there is a positive expectation that the reinstated fiscal support will increase family income by roughly R40 billion in the next six months, benefiting food retailers and providing much-needed relief to clothing and furniture retailers.
“Non-pensionable cash allocations paid to civil servants beginning in September 2021 will likely benefit clothing and furniture retailers, while grocery retailers will benefit from the SRD grant renewal,” BER said in a statement. .
McCurrie, on the other hand, is less convinced that the reinstatement of aid grants will have a significant impact on increasing consumers’ purchasing power. He told Moneyweb that he believes the contribution from the grants will be relatively marginal.
However, despite the increase in retailer confidence, the sector has seen a decline in clothing and furniture sales volumes in the reporting period.
“Aside from lost sales and destruction caused by deadly riots and looting in KwaZulu-Natal and Gauteng, tighter lockdown restrictions amid rising Covid-19 infection rates at the beginning of the third quarter left consumers immobile, to some extent, and reluctant to visit shopping malls and shopping centers, ”said BER.
“Additionally, persistent bottlenecks in the global supply chain, which have led to inventory shortages and higher input costs, continue to create a disturbing business environment for retailers,” added BER.
Meanwhile, sustained demand for home improvements amid the trend to work from home and increased demand for damage repairs, as a result of destruction seen in some parts of the country, are believed to have supported the rise. in sales volumes for hardware retailers. .
The survey further noted that retailers kept selling prices high, with nondurable goods seeing the biggest increase in selling prices in five years.
“This multi-year record is a by-product of rising fuel and electricity prices amid rising world prices for food staples,” said BER.
“Purchase prices also increased by [the third quarter of 2021], mainly due to global supply chain disruptions and sharp increases in freight prices, ”added BER.
Looking ahead, the BER stated that retailers are generally pessimistic about business conditions and sales volumes.
“The effects of civil unrest (which could last for about 18 months), a weak labor market, the ongoing Covid-19 pandemic and global supply chain disruptions remain causes of uncertainty for the sector,” said BER .