Ayanda Shezi and Siseko Njobeni

SOUTH African consumers continued to take advantage of the environment of favourable interest rates and relatively low inflation over the past few months, although signs of a slowdown have begun to emerge in certain sectors.

With talk on interest rates by the Reserve Bank becoming more hawkish, and the stimulus of interest rates at 24-year lows slowly starting to wear off, it was only a matter of time before consumer demand began to moderate, economists said yesterday.

Vehicle sales, although still at high levels, show signs of a slowdown in the year-on-year growth rate. Retail sales, a key indicator of domestic demand, rose to four-month highs in August, but could also taper off in coming months.

Figures released by Statistics SA yesterday show that retail sales rose 7,2% year on year in August, after a slowdown to a revised 3,8% in July, from 5,8% the month before.

Strong consumer demand has also been reflected in high credit demand figures as consumers take on more and more debt, confident that they will be able to pay it off as debt-servicing costs remain low. Robust domestic demand has helped to boost economic growth to near 5% in the second quarter of this year.

In addition to interest rates being at 24-year lows, the Bank trimmed rates by a further 50 basis points in April, sending consumers on a spending spree.

Absa treasury economist Chris Hart said yesterday that although the figures were volatile and changed from month to month, momentum appeared to be slowing, even though the current figure showed a surge.

"With talk of a possible rate hike, consumers will be more wary about taking on more debt in coming months," he said.

After two successive monthly records, last month’s new-vehicle sales yesterday showed a lower year-on-year growth compared with the September figures. One economist said this was the start of a gradual moderation of the significant increases in sales.

The National Association of Automobile Manufacturers of South Africa (Naamsa) said last month’s new-vehicle sales of 50697 units were 19,4% higher than those for the previous October. The sales were, however, lower than the 54574 units sold in September.

The year-on-year increase in September was 26,5%, while the year-on-year improvement in August was 29,4%. Sales in the first 10 months of this year were up 26%.

At 33 343, car sales were 8% lower than the 36 457 sold in September. Light commercial vehicle sales were 5,3% down, compared with September’s. Sales in the medium and heavy trucks segments, however, showed marginal increases, compared with September’s.

Absa economist John Loos said: "I think from now onwards, we will see a gradual slowdown in growth. But the fundamentals supporting the growth are still there."

Naamsa executive director Nico Vermeulen said the lower increase in vehicle sales had nothing to do with a possible interest-rate cut.

"The effect of a rate adjustment, whether a cut or an increase, is usually felt between three and six months after the event," he said.

He said the moderation in sales growth was expected following successive record increases in August and September. "In addition to that, the increases in August and September may have benefited from purchases of car rental businesses.