Results form the latest Bureau for Economic Research (BER) Retail Survey, released yesterday, indicate that confidence levels of retailers soared during the second quarter of this year.

After slipping from 68 to 65 index points during the first quarter of 2004, retailer confidence surged to 80 index points during the second quarter.

Business confidence is calculated as the gross percentage of respondents that rated prevailing business conditions as satisfactory.

With 80% of the BER’s respondents in the retail sector rating prevailing business conditions as satisfactory, retailer confidence is currently at a 16-year high.

BER economist Linette Ellis said the increase in retailer confidence can probably be ascribed to strong retail sales volumes increased by an impressive 6,4% year on year during the first quarter of 2004. Official statistics for second quarter retail sales are not yet available, but the BER’s survey results suggest that the consumer spending spree continued during the second quarter of 2004. The BER’s respondents in the retail sector reported that the growth in sales volumes of non-durable goods (for example, food beverages and groceries) accelerated considerably during the second quarter.

"Lively sales of food, beverages and groceries can probably be ascribed to relatively subdued price increases in these categories, as well as high real wage settlements and increases in social grants, which raise disposable income," Ellis said.

In contrast, sales growth in the durable goods category – furniture, household appliances, electronic equipment and jewellery – eased substantially from the heady rates registered during the second half of 2003 and the first quarter of 2004.

Ellis said durable goods sales have been benefiting from the stronger exchange rate and low interest rates. The strengthening of the rand enabled retailers in goods with high import content, such as electronic goods, to lower their selling prices, while the decline in the prime overdraft rate during 2003 lowered debt-servicing costs. However, it appears as though many consumers are now stocked up on furniture and household appliances and electronic equipment and consequently durable sales growth has started to slow to a more sustainable level. Although the growth in sales volumes of semi-durable goods – clothing and footwear – also edged lower, it nevertheless remained relatively lively during the second quarter.

Another striking feature of the second quarter survey results is that most retailers are no longer reducing their selling prices in an attempt to attract customers. This suggests that we could be at a lower turning point in the inflation cycle and that inflation could accelerate over the short term. Sturdy growth in sales volumes and slightly higher selling prices are boosting profitability in the retail sector.

The BER’s said that its latest retail survey results foreshadow a sustained strong retail performance. Supported by low inflation and interest rates, consumer demand is expected to remain lively during the second half of the year.

The second quarter survey was conducted between May17 and June 8 and covered roughly 540 regular participants in the retail sector.