South African retail sales grew at the slowest pace in more than two years in April, adding to concern that weakening household consumption would curb growth in the economy this year.

Retail sales edged up by 1% compared to the same month last year, data from Statistics SA showed yesterday. This compared poorly with consensus forecasts for a rise of 4,1%, and was well below that of 6,7% in March.

Retail sales are an important indicator of consumer spending, the economy’s main engine.

"It’s a terrible number. It shows that the consumption side of the economy is slowing quite drastically and the consumer is under stress," Brait economist Colen Garrow said yesterday.

The dismal figures followed news last week that confidence in the retail sector collapsed during the second quarter of this year, undermined by weaker growth in sales volumes.

"Unfortunately, on a trend basis, there is some evidence to suggest that South African retail activity is facing increasing strain in 2012," Stanlib economist Kevin Lings said yesterday.

Retail spending power was being eroded by a range of price increases, including energy and transport costs, education fees, medical expenses and water tariffs, he said.

Sales for retailers of household furniture, appliances and equipment fell by 4,2% year on year. Sales for retailers of food, beverages and tobacco fell by 3%, while growth was virtually flat in sales by general dealers, which have the biggest weight in the measure.

The figures suggest that growth in the economy may slow more sharply than expected this year, even if the pace of private sector investment picks up - which is unlikely as two recent business confidence indices were significantly weaker.

Some analysts said the sluggish sales figures reinforced market speculation that there could be an interest rate cut later this year.

"With the consumer under pressure it’s unlikely that the Reserve Bank will sit quietly and watch the momentum in the economy slowing. An interest rate cut could be on the cards later this year," Mr Garrow said.

Economic growth is expected to slow to 2,8% this year from 3,1% last year, on the assumption that Europe’s debt crisis does not take a significant turn for the worse.

Local manufacturing is also battling as Europe is one of SA’s main trade partners. Factory output posted a modest 1,2% year-on-year increase in April after falling by 2,9% in March.

During the first quarter there was a slowdown in the wholesale, retail and motor trade sector, which includes catering and accommodation.

"Consumer spending and retail sales will remain weak during the year," Nedbank economist Johannes Khosa said. "Confidence will be hurt by poor growth prospects, both globally and locally, which will heighten worries about job security, making consumers more cautious about spending."