RETAIL sales rose by 8,7% in the year to August, a slower rate than the previous month following two interest rate hikes but still robust, data showed today.

Consumer demand has been one of the main drivers of faster economic growth in the economy but interest rate hikes are likely to temper spending in the months ahead.

Separate data showed South African manufacturing activity bounced back last month, fuelled by an acceleration in job creation and demand for domestic goods as the rand weakened.

Statistics SA said retail sales rose by 9% in the three months to end-August compared to the same period the previous year. The annual increase for July was revised down to 9,6% from 9,7%.

Analysts said the slight drop in sales growth was unlikely to deter the Reserve Bank from raising its repo rate again in December to 9,0%.

“Maybe retail sales growth is eventually going to respond to the higher interest environment but they still remain very strong,” Brait economist Colen Garrow said.

“Even though there has been some easing there is still sufficient pressure for the Reserve Bank to hike interest rates come December,” he said.

Soaring domestic spending has fuelled rising demand for credit, which accelerated to a new record 25,28% year on year in September — reinforcing the case for further interest rate hikes.

Household debt is also at record levels, nearing 70% of disposable income. The August retail sales number reflected two of the three half percentage point rate hikes since June with the latest increase coming in October.