Despite weaker retail performance in August, economists expect positive contribution to Q3 GDP growth

Stronger balance sheets and improving purchasing power are expected to support retail sales in the near term.

The outlook by economists at FNB follows the latest retail data released by Statistics South Africa (Stats SA) on Wednesday.

Retail sales growth decelerated in August, coming in at 2.3% year-on-year, from 5.7% in July.

Despite the weaker performance, economists believe not all is lost in the sector.

Despite the drop in the year-on-year sales, the total sales volume over the last three months remains more than 1% higher compared to the preceding three months.

FNB said this suggests that retail activity will likely still make a positive contribution to third-quarter GDP growth.

The overall strength in retail, particularly in non-essential categories, points to improving household purchasing power and balance sheets, alongside a less restrictive monetary policy environment.

Economists said the persistent weakness in food and beverages is concerning, although this trend somewhat contradicts the third-quarter FNB/BER Consumer Confidence Index, which showed a marked increase in sentiment among lower-income households.

That said, FNB said the recently announced above-inflation multi-year wage deals in various sectors should help mitigate these financial pressures moving forward.