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South Africa’s retail trade sales increased in October to a two-year high despite weak consumer demand during the year, showing that South Africans are ready to spend money.
According to Statistics SA, annual retail sales increased by 6.3% in October, thanks to favourable base effects and South African consumers gearing up for the 2024 festive season.
“Retail sales have been trending upwards in recent months and we believe this trend will continue in 2025,” Jee-A van der Linde, senior economist at Oxford Economics Africa, says.
Seasonally adjusted retail trade sales increased by 1.6% in October compared to September after a 0.6% decline the month before. Van der Linde says favourable base effects meant that sales in real terms were up by a sizable 6.3% compared to 1.1% in September.
The largest positive contributor to this annual increase was general dealers (+11.5% and contributing 4.9 percentage points). Seasonally adjusted retail trade sales increased by 1.2% during the three months ending October 2024, compared to the preceding three months.
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This chart shows how Oxford Economics Africa anticipates retail sales to increase over the coming month as consumers ramp up buying activity for the festive season:
Van der Linde says retail trade sales have been steadily trending higher, despite soft consumer demand.
Household consumption growth slowed to 0.5% in the third quarter compared to the second quarter’s 1.2%, but Oxford Economics Africa expects a re-acceleration in the fourth quarter thanks to benign inflation and lower interest rates heading into the festive period.
“Although consumer confidence sagged marginally in the fourth quarter, consumers continue to demonstrate an increased willingness to spend. We believe consumers’ spending ability will strengthen further in 2025, but improvements will be gradual.
“The South African economy should follow a gradual upward trajectory in the near term and we forecast the economy will expand by 1.5% in 2025, with real gross domestic product (GDP) growth averaging around 1.7% per year over the next five years.”
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Dr Elna Moolman, Standard Bank Group’s head of South Africa macroeconomic research, says the retail sales data for October was quite strong – depending on exactly how you do the comparison, as any comparison might be influenced by technical factors.
“In other words, when we compare October to September or when we compare October this year to October last year, we would be influenced by the fact that the base was quite weak in both these periods that we are then comparing this October’s sales to.”
“However, if we just look at the values and recent trends, it is consistent with our expectation that there would be an improvement in consumer demand and that we would see better momentum than at the beginning of the year in real terms.
“When we try to proxy volumes, in other words, we strip out the impact of inflation, then of course we see the benefit of the very low inflation that we had in recent months. This would also then be supported by the two-pot retirement system reform where pension fund members could withdraw some funds in September and October.”
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