Whatshot
Bugle Sales Talk Editorial
Bugle Sales Talk Editorial
Date: 2015-12-18
For the three months to October the figures for retail sales growth showed a relatively healthy 3,3% despite real economic growth for the quarter being low at around 1%. Retail price inflation is also relatively low at 3,9%. It is important when measuring an economic indicator such as retail sales to consider the figures at inflation adjusted pricing to ensure that actual growth is measured rather than just growth in prices for the same quantity of goods or services.
Once the different categories of retail sales are considered however, we do see certain items pointing to weakness in the near term and a possible impact on the property market. Categories within the retail sales data such as Textiles, Clothing, Footwear and Leather grew at 5,1%, while the broader Pharmaceuticals and Medical Goods category grew by 4,6%. Our particular interest however as property professionals is in the demand for durable goods consumption, household furniture, appliances and equipment and of course vehicle sales. The figures for the durables category are a lot more sobering and fell by -6,1% for the three months to October in real terms. Vehicle sales have followed a steady decline and slowed to a low of 1,8% year-on-year as at October. Car dealerships around the country have to be feeling this pressure. In many ways the vehicle sales industry is similar to the property market in that pricing often tends to be firmer and the actual volume of transactions slows down considerably when things get tighter. This is exactly what is currently happening in the vehicle sales market as a depreciating Rand keeps the price of new cars high and the demand for new cars therefore slows down. People tend to then focus on buying second hand vehicles or hold on to their existing vehicles for a little longer. The pre-owned market for cars therefore seems to benefit from the pressure on the new car sales market. If we consider vehicle sales as a leading economic indicator then this is pointing to weaker economic demand overall in the first quarter of 2016 and possibly pressure on house prices and demand.
Another important retail category for residential property demand forecasting is the Hardware, Paint and Glass Products sector. There has been a sharp decline in this group from a high of 9,7% year-on-year growth for the three months to April 2015 to only 1,2% by October. This tells me that the market for home improvements and new builds is starting to slow as disposable income comes under pressure and households make the decisions on aggregate to delay the renovations to their existing homes and new building projects are put on hold.
There seems no doubt amongst the leading economic commentators in the country that 2016 is expected to be an economically tougher year and that house price growth can be expected to slow down further.
For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.
Andreas Wassenaar
Principal - Seeff Dolphin Coast
Cell: 082 837 9094