South African retailers are confident.

The decision to leave the repo rate (South Africa's key interest rate) unchanged at 9.0 percent itself should have been enough to unhinge retail confidence. The South African Reserve Bank (SARB), the country's central bank, in its February 15, 2007 statement said it was afraid that consumer demand was growing too rapidly, even though other inflationary pressures were lessening.

Add to the SARB's decision the fact that the government tabled the federal budget, and the fact that local maize prices were rising, a development that the Bureau for Economic Research (BER) at the University of Stellenbosch, termed a "surge," it would be logical to assume that South African retail confidence should have taken a dramatic hit.

But such was not the case.

On March 19, 2007, the BER released the results of its "Retail Survey" under the headline, "Retail confidence shows remarkable resilience." In fact, retail sales did slow slightly during the first quarter 2007. But the BER said, "The moderation was significantly less than expected."

The BER cited Statistics South Africa for the information that retail sales volume increased in 2006 by a "blistering" 9.7 percent. This equals a record for volume increase set in 2004. One might conclude from this impressive sales figure that the market for 2007 was "oversold." However, the minimal decline of retail sales in the first quarter 2007 appears to indicate sufficient consumer demand.

The BER pointed out that demand persists in spite of the fact that interest rates increased 200 basis points during 2006. The BER said that these rate hikes were, "Unlikely to weigh meaningfully on sales during the first half of 2007." A further slowdown of retail sales in the first half of 2007 is "unlikely."

In terms of how various product categories fared in the retail survey, the BER indicated that sales of footwear and clothing slowed, but furniture, electronics and other household goods, which it classifies as "durables," increased. In what the BER termed "the biggest surprise" of the retail survey, the durables index increased to 89 points from 87 points in the final quarter of 2006.

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