Retails sales 2020: Weakness across the board, but better than expected

By Siphamandla Mkhwanazi, FNB Senior Economist

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As expected, the December retail trade sales decreased by 1.3% y/y, taking the 2020 volumes to 6.9% below the 2019 levels.

Once again, all “Other” (including jewellery and sports equipment) retailers posted the weakest performance, declining by 14.1% y/y in December. We suspect, however, that online sales remained strong during this period: internal spend data shows that such volumes spiked during Level 5 lockdown and remained strong throughout 2020. On the opposite end of the spectrum, Hardware materials increased the fastest, recording 8.0% y/y, suggesting the continuation of the home-improvement drive. Notably, Pharmaceutical sales jumped to 3.3% y/y in December, in line with the resurgence in Covid-19 infections.

Seasonally adjusted retail trade sales fell by 0.8% m/m, following a Black Friday inspired 2.1% m/m jump in November 2020. The subdued sales volumes reflect the fading government support to households (via UIF and Temporary Employer/Employee Relief Scheme [TERS] as well as Social Relief of Distress [SRD] grants) as well as the reinstitution of lockdown restrictions, first in “hot spot” regions and later throughout the country.  In all, the 4Q20 seasonally adjusted retail trade sales increased by 2.8% q/q (or approximately 11.2% saar), and thus should contribute positively to 4Q20 GDP, albeit at a softer rate compared to 3Q20. 

Ultimately, retail sales volumes in 2020 performed better than initially expected, supported by the TERS payments, government’s extended social grants programmes and the low interest rate environment. Positively, some of this support has been extended to March this year. This will counteract the impact of rising food, electricity and fuel prices. The longer-term outlook, however, remains uninspiring, weighed on by rising unemployment and generally low consumer sentiment.