S.Africa retail sales growth slows, economic outlook bleak

JOHANNESBURG (Reuters) - Growth in South Africa's retail sales slowed in January, official data showed on Wednesday, adding to signs the economic recovery remains hesitant and backing the case for interest rates to stay at four-decade lows for longer.

The rand fell to a new four year low of 9.2351 against the dollar from 9.1796 before the data, released a day after a Reserve Bank report showed the current account deficit remains very wide at 6.5 percent of GDP.

Retail sales were up just 1.9 percent year-on-year in January from a revised 2.2 percent in December and fell 1.2 percent on a month-on-month basis, Statistics South Africa said.

Economists polled by Reuters had forecast year-on-year sales growth of 3.5 percent.

"The number ... reaffirms the view that the domestic economy is in a cyclical downswing," said Jana Le Roux, an economist at ETM Analytics.

"For interest rates, we believe that in light of this data the South African Reserve Bank is likely to preserve its dovish stance. However, they will note the upside risks to inflation stemming from the weakness we've noticed in the rand."

The Reserve Bank's ability to loosen monetary policy further is constrained by the need to keep inflation in a 3 to 6 percent target band, Governor Gill Marcus said last week.

Although economic growth remains sluggish at less than 3 percent, the central bank has kept its benchmark repo rate at 5 percent since a 50 basis point cut in July last year, citing rising inflationary pressures.

The Bank will hold its second policy meeting of the year next week.

Source: http://news.yahoo.com/africas-january-retail-sales-growth-slows-1-9-110944483--business.html

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