Retail sales growth improves in line with retailers' expectations

Johannesburg, 25 March

  • Share
EY - Download the infographic

Results from the latest EY/Bureau for Economic Research (BER) Retail Survey suggest that retail sales volumes continued to mend during 2015Q1, with volume growth improving in line with retailers' earlier expectations1. According to Statistics South Africa, the growth in retail sales volumes accelerated from a five-year low of 1.4% year on year (y-o-y) during 2014Q2 to 2.2% y-o-y in 2014Q3 and 2.4% y-o-y in 2014Q4. Preliminary data from Statistics South Africa indicates that the growth in retail sales volumes slowed to 1.7% y-o-y during January 2015, but the results from the 2015Q1 EY/BER Retail Survey suggest that volume growth remained solid during the first quarter as a whole.

EY/BER 2015Q1 Retail sales volumes index

According to Derek Engelbrecht, Retail & Consumer Products sector leader at EY, “A recovery in strike-affected incomes following the end of debilitating industrial action in the platinum and engineering sectors has been supporting the retail sector since August last year. In addition, the petrol price declined by nearly R4 per litre between August 2014 and February 2015, while the price of illuminating paraffin dropped by R3,45 over the same period. Although fuel prices increased considerably again in March 2015, petrol and paraffin prices are still respectively 22% and 32% lower compared to their March 2014 levels, signifying a substantial boost to the purchasing power of low and middle income households."

The uptick in retail sales growth over the last six months has been broad-based, but it appears as though durable goods retailers (e.g. furniture, household appliances, electronic goods and hardware retailers) have had a particularly good first quarter. The Retail Survey results suggest that durable goods volume growth accelerated for the third consecutive quarter and profitability levels continued to improve. The durable goods sector, and furniture and household appliances sales in particular, came under severe pressure from the dramatic decline in unsecured lending and the deterioration in income growth during 2013 and 2014H1, but sales growth has been recovering since 2014Q3.

In fact, business confidence2 levels amongst durable goods retailers improved from 61 in 2014Q4 to 79 in 2015Q1 - the highest level since 2007. Engelbrecht noted that "Hardware, paint and glass retailers are particularly optimistic about their sales prospects. Apart from a gradual improvement in building activity, these retailers may also be experiencing increased demand for products that could be utilised during South Africa's increasingly frequent power outages, such as torches, batteries, gas stoves, uninterruptible power source (UPS) batteries or even small generators." 

Another striking feature of the latest survey results is the fact that the majority of retailers reported an acceleration in selling price inflation. Retailers expect to increase their selling prices at an even higher rate during 2015Q2, suggesting that the CPI inflation rate may well have bottomed during 2015Q1. Encouragingly, retailers reported that their purchasing price increases continued to moderate. For the first time in many years, it appears as though retailers have not passed the full benefit of lower input costs on to consumers via lower selling prices. Along with a recovery in volume growth, this translated into a significant improvement in overall profitability levels compared to the same time a year ago, and points to increased pricing power in the retail sector on the back of a recovery in demand. In line with this improved performance, the business confidence levels of retailers increased from 55 to 60 index points during 2015Q1.

Engelbrecht said that "Boosted by a recovery in strike-affected incomes and substantially lower fuel prices compared to last year, the growth in retail sales volumes will in all likelihood continue to improve during 2015Q2. However, factors such as the sharp increase in the fuel and Road Accident Fund levies, the recent depreciation in the Rand exchange rate against the US Dollar, higher personal income taxes for high income consumers and the projected slowdown in government spending announced by the Minister of Finance in the February 2015 budget are expected to rein in real disposable income growth, and hence retail sales, again from the second half of 2015."


About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization and may refer to one or more of the member firms of EY Global Limited, each of which is a separate legal entity. EY Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit

This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.

Following on from EY’s successful integration in 2008 of 87 countries into one area from across Europe, Middle East, India and Africa (EMEIA), the firm has launched its Africa Business Center™ (ABC), which aims to enhance the effective and efficient links between its geographic reach and areas of expertise. The firm enjoys representation in 33 countries across Africa.


Twitter: @EY_Africa #retail

Issued by: Fathima Naidoo
Tel: +27-11-772-3151
Cell: +27-76-662-2842

1The fieldwork of the first quarter survey was conducted between 2 February and 3 March 2015.

2The business confidence index depicts the percentage of retailers that are satisfied with prevailing business conditions in their sector.