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Frederick Mitchell
September 23, 2024

A view on Demand in the Economy: Retail Sales performance

Retail sales increased by 2.0% in July 2024, falling short of the anticipated 3.5% growth forecasted by the market. The primary contributors to this growth were:

  • General dealers, which experienced a 4.4% increase, contributing 1.8 percentage points to overall retail sales growth.
  • Pharmaceutical and medical goods retailers, which grew by 5.9%, adding 0.5 percentage points to retail growth.

Annual retail growth across other categories also showed notable expansion in July 2024, signaling positive demand in the economy moving forward. However, there was a downside, as retailers of hardware, paint, and glass contracted by 6.3%, which pulled overall retail sales growth down by 0.5 percentage points for the month.

Despite the year-on-year increase in retail sales for July, overall demand remains weak. Ongoing consumer indebtedness, general inflation, and high interest rates continue to erode purchasing power.

The interest rate decision of lowering interest rates by a mere 25 basis points by the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) provided very little relief given very low consumer demand and overall indebtedness of households. This rate cut could have been the catalyst needed to stimulate demand within the South African economy to support economic growth in the near future as demand remains a key ingredient in the South African economic “growth mix”.

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A View on Demand in the Economy: Retail Sales Performance

In 2024, South Africa’s retail sales rose by 6.3%, significantly surpassing the expected 2.1% increase, indicating a rebound in consumer demand. Key contributors included substantial growth in general dealers and household goods. Lower inflation and a potential interest rate cut could further enhance consumer optimism and spending moving forward.

Consumer Inflation

Inflation in South Africa rose slightly from 2.8% in October to 2.9% in November, driven mainly by housing and utilities, food, and miscellaneous goods. Despite price increases, there are signs of slowing growth. The MPC’s recent 25 basis point interest rate cut may ease financial pressures on consumers, supporting future demand and economic momentum.

Manufacturing Production

In 2024, South Africa’s manufacturing production rose by 0.8%, following a 1.4% increase in September. Key contributors included significant growth in petroleum, food, and basic iron and steel sectors. Despite a decline in the motor vehicle sector, the manufacturing industry remains vital, employing 1.6 million people and driving economic growth.

Challenges, Changes, and New Horizons

To reflect on 2024, what a remarkable year it has been! There were significant developments both locally and globally—not just economically but politically as well. We can all agree, “what a year it has been!”

Mining Production and Sales

Mining South Africa rose by 1.4% in October 2024, building on a solid 4.9% growth from September. Key contributors included significant increases in iron ore, platinum group metals, and diamonds. Mineral sales also increased by 1.6%. Despite some challenges, the sector is rebounding strongly, supporting over 484,000 jobs. With improved economic confidence and a focus on stabilising production, the future looks promising for South Africa’s mining industry.
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