Shoppers surprised in February as retail trade sales unexpectedly rose 2.3 percent from a year earlier, scaling up from an upwardly revised 3.7 percent contraction in January better than the market expectation of a 1.9 percent slump.
FXTM’s Lukman Otunuga said the positive data print was likely to boost appetite for the rand, which was already experiencing a positive week.
“Should the risk-on remain the name of the game for the rest of the trading week and the dollar extends losses, this may push the rand higher,” Otunuga said.
The positive data also saw the JSE All Share index lifting 1.1 percent to 67 812.15 points while the Top 40 Index also gained 1.14 percent to 62 084.39 points.
Statistics South Africa (StatsSA) said this was the first positive reading in retail activity since March 2020, following a substantial decline in Covid19 infections.
StatsSA said five of the seven retail categories recorded an increase in sales in February.
Household furniture, appliances and equipment had the biggest positive impact on growth of retail activity, climbing 17.3 percent year-on-year.
Clothing, footwear and leather goods, and general dealers were the second-biggest positive contributor to the reading with a 12.3 percent increase
Retails, however, eased 0.9 percent in the three months ended February, but rebounded to 6.9 percent on a month-to-month basis following a 2.4 percent decline in January.
Mkhwanazi said near-term shopping activity should continue benefiting from the extension of the social and loss of income relief schemes, which will run into April this year.
“Combined with the slightly lower tax burden and low interest rate environment, this will help mitigate the impact of rising food, electricity and fuel prices,” Mkhwanazi said.
“We are, however, concerned about the slow pace of the vaccine roll-out
and persistent electricity supply disruptions. These could disrupt economic activity and hamper the ongoing recovery in consumer spending.”
South Africa moved from level 3 to adjusted level 1 at the end of February, which saw the relaxation of many lockdown restrictions.
Consumer spending, however, could remain constrained following a double increase in fuel and electricity prices since the beginning of April.
Investec economist Lara Hodes said household balance sheets remained under pressure and consumer confidence was still subdued.
“A third wave as we head into winter remains a substantial risk, as we have seen in other countries,” Hodes said. “Accordingly, growth in household consumption expenditure, which comprises around 60 percent of GDP is likely to be modest in the medium term.”