July 15 (Bloomberg) -- South African retail sales fell 4.2 percent in May from a year earlier, less than expected, after the Reserve Bank cut its benchmark interest rate five times since December.

The decline in sales eased from a revised 6.9 percent the month before, the Pretoria-based statistics office said on its Web site today. The median estimate of six economists surveyed by Bloomberg was for a 5.1 percent decline.

“The interest rate cuts are stopping the slide and will eventually translate into an improvement,” said Azar Jammine, chief economist at Econometrix in Johannesburg. “We have hit the bottom in year-on-year growth in retail sales.”

South Africa’s economy, which is in a recession for the first time in 17 years, contracted an annualized 6.4 percent in the first quarter as the global economic crisis slashed manufacturing and mining output. All five of the country’s biggest banks have reported an increase in bad loans, crimping new lending and hurting consumer spending.

The “pace of decline” in the economy is relenting, Jammine said, adding that retail sales will improve by year end.

Sales in April were particularly bad because there were four public holidays in the month, Jammine said. The drop in April was the biggest since July 2000.

The rand was little changed at 8.1577 per dollar as of 12:40 p.m. The yield on the R157 government bond, due 2015, fell two basis points, or 0.02 percentage point, to 8.73 percent.

South Africa’s unemployment rate rose to 23.5 percent in the first quarter, the highest of 62 countries tracked by Bloomberg, from 21.9 percent in the previous three months, the statistics office said on May 5.

Last month, the central bank left the benchmark interest rate at 7.5 percent. Reserve Bank Governor Tito Mboweni said there were signs that the downturn, both globally and domestically, may be reaching a turning point.

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net

Last Updated: July 15, 2009 06:49 EDT