Reuters

GROWTH in retail sales quickened in the year to February suggesting consumer demand remains strong, although analysts said it appeared to be moderating from the pace seen last year.

Consumer demand has been one of the main drivers of economic growth in South Africa during the past year, spurred by the lowest interest rates in more than two decades, low inflation, and a growing influx of imports triggered by the strong rand.

Retail sales rose by 5.4% year-on-year in February at constant prices, slowing from 3.4% in January, revised up from a previous estimate of 2.7%, Statistics SA said today.

But those levels of growth were considerably lower than an annual increase of 10.2% in December, which took growth over the whole year to 9.9%.

"I think the figures suggest retail sales growth is moderating, which I think is good news from an interest rate point of view,» said Absa economist Chris Hart.

Interest rates have been slashed by 6.5 percentage points since June 2003, bringing the prime rate set by commercial banks to 10.5 percent, its lowest level since January 1981.

Reserve Bank deputy governor Ian Plenderleith said on Wednesday that the central bank was carefully monitoring strong consumer spending trends.

"If it accelerates further at some point it will generate inflation pressures, at that point we may need to restrain it," he said.

In the three months to February retail sales rose by 6.8% compared to the same period 12 months ago.