May 16 (Bloomberg) -- South African retail sales growth was little changed in March and sales declined in the first quarter, damping chances of faster economic expansion in Africa’s largest economy this year.
Sales rose 6.8 percent from a year earlier compared with a revised 6.7 percent increase in February, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 10 economists was for annual growth of 6.6 percent. While revenue rose 2.1 percent from a month earlier, it declined a seasonally adjusted 1.2 percent in the fourth quarter compared with the previous three months, the statistics agency said.
“The retail sector really didn’t fair really well in the first quarter, which isn’t very good in terms of what it means for gross domestic product growth,” Jeffrey Schultz, an economist with ABSA Group Ltd., said in a phone interview from Johannesburg.
Slower economic growth will reduce pressure on the central bank to raise interest rates this year to curb price increases. The economy expanded 3.2 percent in the fourth quarter, according to the statistics agency. Manufacturing production unexpectedly dropped 2.7 percent in March as a debt crisis in Europe, which buys about a third of South Africa’s factory goods, cut demand for exports.
Low for Longer
The Reserve Bank has kept its benchmark rate at 5.5 percent, the lowest level in more than three decades, since November 2010 to support economic growth.
The economy will probably expand about 3 percent this year, Finance Minister Pravin Gordhan said in an interview on May 11. That is less than half the rate Gordhan estimates is needed to meet a goal of cutting unemployment to 14 percent by 2020. The jobless rate was 25.2 percent in the first quarter, the most of 61 nations tracked by Bloomberg.
“Interest rates remain a very helpful buffer to the South African consumer,” Schultz said. “Low for longer is looking more and more the likelihood for interest rates at the moment.”
Inflation slowed to 6 percent in March and the central bank forecasts it will remain close to the top end of its 3 percent to 6 percent target range this year.
The decline in the first quarter may signal that domestic demand is losing momentum, Nedbank Group Ltd. said in a note to clients.
“Weaker growth is likely as the year progresses as consumer confidence is affected by weak employment and some worries about job security, while high inflation and administered price increases will erode purchasing power,” it said.
The rand weakened less than 0.1 percent to 8.3115 against the dollar by 3:36 p.m. in Johannesburg trading. Forward-rate agreements starting in 12 months dropped 4 basis points to 5.89 percent as investors pared bets on an interest-rate increase in the next year.
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