South Africans splash out on R70bn shopping spree
South African consumers have gone on their biggest Christmas shopping spree in 20 years, with spending estimated to have grown as much as 17% to almost R70 billion as shoppers took advantage of the lowest interest rates SA has seen in years.
Economists said yesterday that this Christmas was the best retail period the market had seen for two decades, and would be a memorable period.
They said increased consumer spending had been driven largely by higher personal disposable income and this year's fall of 650 basis points in interest rates.
Much of the money went on food, clothes, groceries, jewellery, furniture and beverages.
Lower interests rates have also enticed consumers to raise their debt levels, with household debt as a percentage of disposable income rising to 55,4% this September from 51,4% at the end of last year.
However, the inflation outlook remained favourable, economists said, and monetary policy was likely to be supportive of further growth next year.
"Policy will not be adventurous. Interest rate cuts (next year) will be modest at best," Standard Bank group economist Goolam Ballim said.
"SA is in a truly remarkable sweet spot in terms of inflation and interest rates. This is the best retail period the market has seen in decades, it will be a memorable period," Goolam said.
Credit Guarantee senior economist Luke Doig projected a 15%, or R67,5 billion, growth in sales from November to December. This means that consumers are likely to spend R8,8 billion extra compared to last year's R58,7 billion.
Doig's remarks were backed by a study by the University of Stellenbosch's Bureau of Economic Research, undertaken for auditing firm Ernst & Young, which projects a 17% surge in total sales from October to December this year.
Retail group Foschini said yesterday it expected "a bumper festive season".
The company's financial director, Ronnie Steyn, said: "The festive season has started very well for us and the other retailers."
South African Breweries (SAB) said sales volumes were already up on last year's and it was expecting "a very good festive season". SAB communications head Michael Farr said: "Festive season sales have been very good."
He said the company was expecting more sales today as had traditionally been the case. "We will more than meet the needs of consumers. In fact, for the first in the history of the company we will have three of our production facilities operating 24-hours and seven days a week," said Farr.
Absa treasury economist Chris Hart said one of the main drivers of consumer spending was the strong local economy.
The economy grew 5,6% year on year in the third quarter, its fastest pace in more than eight years. "Interest rates are fairly low from the point of view of credit demand. It is cheaper for consumers to buy," Hart said.
The Reserve Bank's repo rate remains at 7,5%.
Reserve Bank governor Tito Mboweni said at the monetary policy committee's meeting earlier this month that the peak in CPIX (consumer inflation excluding mortgage costs) next year was likely to be lower than the 5,8% it forecast last month in its monetary policy review.
Clouding the inflation outlook, however, was inflationary pressure from increasing credit demand and possible supply constraints from rapid economic growth. Money supply (M3) grew by 14,9% in October, while private sector credit extension rose by 10,2%. Both figures are expected to come in slightly higher when they are released next week.
Hart said salaries and wages had also been rising, over and above inflation.
He said items which consumers were buying with their bonuses this year, such as television sets and DVDs, have been declining in price.
Consumer spending has rocketed for much of this year, with figures from Statistics SA showing that retail trade sales increased 11,7% in September.
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