January 19, 2005

By Andile Ntingi

Johannesburg - Growth in formal retail sales was forecast to average 8.5 percent in 2005, with sales expected to amount to R350 billion on the back of low interest rates and the inflation environment, the Bureau for Market Research (BMR) said yesterday.

According to the BMR, sales in semi-durable goods such as clothes and footwear would grow by 10 percent, while growth in non-durable such as food and beverages, and durable items such as refrigerators and cars, was expected to vary between 7 percent and 8 percent respectively.

"It takes 18 to 24 months for interest rate cuts to have an effect on retail sales. The impact of lower interest rates will be lower than two years ago when interest rates came down drastically," said Deon Tustin, a senior researcher at Unisa-based BMR.

"The two other factors that are likely to drive sales are the lower inflation environment and the emerging black middle class, which benefits the clothing, footwear, food, motor and insurance sectors."

The bureau projected that 46.3 percent of the sales would occur during the first half of 2005, while 7.2 percent would happen in February and it would be 12 percent in December.

Data released by Statistics SA last week showed that annual nominal retail sales grew by 16.7 percent to R27.59 billion in October last year.

The figures bring the total for the first 10 months of 2004 to R252 billion, 13.2 percent higher than the R223 billion in the corresponding period in 2003.

Following the SA Reserve Bank's decision to cut interest rates to 23-year lows, the country has seen a massive spending boom that has led to the economy growing by 5.6 percent in the third quarter of last year.