By Jason Muscat, FNB Senior Economic Analyst.
January retail trade sales moderated slightly to 3.1% y/y, from a downwardly revised 5.1% in December.
Sales were down -1.6% m/m (seasonally adjusted). All categories of retailers expanded, with the biggest jump among household furniture, appliances and equipment which was up 9.2% y/y. Textiles, clothing and footwear continued its strong performance registering growth of 6.5% y/y while “all other retailers” climbed 5.8%. General dealer sales growth softened to 1.1%, food and beverages from specialized stores to just 0.2% and pharmaceutical sales to 3.7%.
The data suggests that there is a recovery underway in the household consumption of durable and semi-durable goods which have struggled under the low growth environment. We believe retail sales will continue to perform at these levels through 2018 as credit growth picks up, wage growth tracks roughly 2% ahead of inflation, CPI remains benign and the tailwind of last year’s interest rate cut (and the potential for another next week) begin to take a firmer hold. Nevertheless, we expect that a hike in the VAT rate, fiscal drag and the 52c/litre added to the fuel price will hold back a more robust expansion.