SA retail trade sales for January recorded a 3.9% growth year on year (y/y) after an unrevised 8.7% growth in December.

Seasonally adjusted retail trade sales growth fell 0.6% in January, following a month-on-month change of 1.4% growth in December.

The Nedbank economics unit said the much weaker than expected retail sales number suggested that consumer spending was losing some momentum, which did not bode well for already fragile economic growth.

Kevin Lings, Stanlib economist, said that households could not avoid eminent increases such as for food and transport, as they related to necessities or essential goods.

This, he said, was forcing consumers to either cut back on non-essential purchases, including general retail activity, or take on additional debt.

In real terms, retail trade for the three months ended January 2012 increased 6.9% compared with the three months ended January 2011.

Jeff Schultz, economist at Absa Capital, said it was because of the 6.9% growth that they did not believe that one month of disappointing sales heralded the beginning of an outright deterioration in the retail sector.

"We remain relatively confident in our view that a supportive consumption environment provided by the low levels of interest rates in the economy and high household nominal incomes should continue to prop up the demand side of the economy," he said.

Schultz added that anecdotal evidence from a number of large listed retailers in SA that sales growth had remained resilient in the opening months of 2012 supported the bank's view.

The bank expected real consumption spending growth to come under pressure in the coming quarters mainly due to an expected higher domestic inflation trajectory in 2012.

January's retail sales print did not alter Standard Bank's economic unit's view that the South African Reserve Bank (SARB) was likely to keep interest rates unchanged at 5.5% throughout 2012.

Economist at the bank, Shireen Darmalingam, said the SARB remained wedded to its inflation target.

She added that with the recent announcement of lower electricity tariffs than previously priced in, coupled with an envisaged entry back into the 3% to 6% inflation target band earlier than anticipated, interest rates could remain flat for some time.

The Nedbank economics unit expected growth in retail sales to remain softer during the year as the support from low interest rates and high income would be contained by moderately high inflation, particularly administered prices, higher debt levels and tighter access to credit.

Lings shared the same view.

"SA retail activity is likely to face increasing strain in 2012. This is due to a range of cost-push factors that are systematically eroding the household sector's retail spending power," he said