Western Cape Business News

Send  Share  RSS  Twitter  16 Sep 2010

RETAILING: Confidence Returns At Last


Recent Western Cape Business News

The Stellenbosch-based Bureau for Economic Research reports that business confidence amongst retailers surged by 14 index points - from 38 to 52 - during the third quarter of 2010. This means that the index almost reversed all the losses of 2010Q2. However, the BER survey produced mixed results. On balance, the results indicate that the recovery in the retail sector remained on track, although areas of weakness persisted.

According to Statistics SA, the volume of retail sales increased by 4.9% y-o-y during the second quarter. The BER’s retail trade survey indicated that the growth in sales subsided during 2010Q3. A net majority of 13% of respondents indicated that sales volumes were lower than a year ago.

A lack of pricing power put further pressure on retailers. A net majority of 16% of respondents indicated lower rates of increase in average selling prices. “These lower rates of increase in selling prices together with the lower growth in sales volume adversely affected retailers’ overall profitability” said BER economist Craig Lemboe.

Whereas the semi-durable goods sector (mainly clothing, footwear and textiles) performed impressively during 2010Q3, the non-durables (food and groceries, beverages, pharmaceuticals and toiletries) and durables (furniture, household equipment, electronic goods, hardware and jewellery) sectors weakened unexpectedly. Non-durable and durable goods traders indicated that the growth in sales volumes and the pace of average selling price increases was much slower than anticipated in 2010Q2.

Also during the third quarter of 2010, wholesale trader confidence returned to the 2010Q1 level, increasing by 3 index points to 50. The rise in business confidence was mainly driven by the consumer goods sub-sector which includes goods such as textiles and clothing, footwear, food, beverages and tobacco, household requisites and pharmaceuticals.

During 2010Q3, business confidence amongst new vehicle traders surged by 30 index points to 79. The performance of new vehicle sales during the third quarter far exceeded expectations and this to a large degree explains the steep rise in business confidence.

The fieldwork for the survey was conducted from 2 - 30 August, amongst the BER’s regular panel of respondents.

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