Shoppers to tighten festive purse strings strings

By Tom Robbins Cape Town

After five years of bumper Christmas sales, analysts expected a subdued season and warned that it would get worse early next year as consumers would feel the effects of recent interest rate hikes.

But it is not all doom and gloom. The expectation is that despite interest rates that have risen for longer than expected, the country has not been derailed from its longer-term consumer growth story.
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Slowdown in new car sales intensifies

By Roy Cokayne

Pretoria – The slowdown in new car sales intensified last month with sales slumping to 29 335 units, almost 16 percent less than in November last year.

It was the 10th consecutive month of no growth in year-on-year new car sales.

Tony Twine, a motor industry analyst and director of Econometrix, said the new vehicle markets were now clearly reacting more sharply to the continuing interest rate pressure of the Reserve Bank’s monetary policy committee (MPC).
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Consumer confidence on the rebound

By Ethel Hazelhurst

Johannesburg – Consumer confidence has unexpectedly rebounded – despite a series of interest rate increases and expectations of another hike tomorrow.

An index compiled by First National Bank (FNB) and the Bureau for Economic Research (BER) rose 4 index points to plus 22 in the fourth quarter from plus 18 in the third.

FNB chief economist Cees Bruggemans said the increase nearly fully reversed the combined decline of the previous two quarters. “The index is now just below the all-time high of plus 23 reached during the first quarter,” he said.

Resurgent consumer confidence is likely to add to pressure on the Reserve Bank to lift interest rates again. The money market is pricing in a hike of half a percentage point in the repo rate when the monetary policy committee (MPC) ends its two-day meeting tomorrow, as well as a possible tightening in January. The rate is 10.5 percent, up 3.5 percentage points since the start of the cycle.
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Edcon feels first pangs of private equity deal

By Tom Robbins

Cape Town – Financing costs are higher than trading profit at Edgars Consolidated Stores (Edcon), as the country’s biggest clothing retailer is being stretched to meet interest repayments under its new US private equity owner.

Half year net losses were R971 million. Had Edcon forgone the Bain Capital deal, which came with punishing interest repayments, it would have turned a profit ahead of the R678 million earned in the same period last year.

In May – just months before August’s credit crunch in the US and Europe – Bain bought Edcon for R25 billion in the country’s biggest private equity deal to date. But, typical of such deals, it added R17.26 billion in European debt to the company’s previously debt-free balance sheet, to help pay for the acquisition. More…

New debt crisis is on the cards – literally

By Ethel Hazelhurst

A s we glide into the gift-giving, high-spending holiday season, another spectre is surfacing in global financial markets: bad credit card debt. People are asking: is this the new subprime?

The UK’s Evening Standard reported that “$415 billion [R2.8 trillion] of US credit card debt could be sucked into the void created by the credit crunch, sending further waves of destruction through global markets”.

The publication may have been overstating the case, considering the figure represents the value of the entire US securitised credit card debt on September 1. But it was making an important point. More…