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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
July 17, 2025

A View on Demand in the Economy

Retail Sales Performance

May 2025

Retail sales in South Africa increased by 4.2% in May, slightly below the market expectation of 4.3% as estimated by analysts for the month. This growth appears to suggest that demand in the South African economy from a consumer’s perspective have rebounded somewhat after a 5.2% increase in April. The consecutive increases in April and May suggest a slow but steady recovery in consumer demand, following the interest rate reductions initiated with monetary easing beginning in September 2024.

The South African Chamber of Commerce and Industry (SACCI) reported a modest rise in confidence, with its index increasing from 114.9 in April to 115.8 in May 2025. Additionally, the FNB/BER consumer index for the second quarter of 2025 improved from -20 to -10 points, indicating cautious but improving consumer sentiment. Despite low inflation and the Reserve Bank’s interest rate cut in January 2025, these factors appear to be gradually influencing consumer behaviour and spending habits.

Key contributors to the modest rise in retail sales included:

  • General dealers: up 3.6%, contributing 1.6 percentage points.
  • Textiles and clothing: increased by 12.5%, adding 2.1 percentage points.

This growth in May 2025 reflects ongoing positive momentum from April’s retail performance and indicates a manageable recovery in demand. The interest rate cuts implemented between September 2024 and January 2025 seem to have alleviated household financial pressures, supporting a gradual uptrend in demand over the past two months. Sustaining this momentum will be crucial throughout 2025, as consumer demand remains a key driver of economic growth and employment in South Africa. Additionally, further interest rate reductions later in the year could bolster demand into late 2025 and early 2026.

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More Coverage

Manufacturing Production

November 2025
In November, South Africa’s manufacturing output experienced a further decline of 1.0%, following a modest increase of 0.4% in October. This downturn was slightly better than market expectations, which had forecasted a decrease of 1.2% for November. The Purchasing Managers’ Index (PMI) also fell by 7.2 points, from 49.2 in October to 42.0 in November 2025, indicating a less favourable business climate anticipated by manufacturers.

Gold and Foreign Exchange

December 2025
The South African International Liquidity Position, as reflected by Net Gold and Foreign Exchange Reserves, saw an increase in US Dollar terms for December 2025, although there was a slight decline when measured in Rand. This occurred alongside the Rand’s appreciation against the US Dollar from November to December, according to data from the South African Reserve Bank.

A Case for Lowering Interest Rates

by the South African Reserve Bank
As the South African Reserve Bank (SARB) gears up for its next Monetary Policy Committee (MPC) meeting on January 29, 2026, the prospect of a 25-basis point reduction in the repo rate, bringing it down from 6.75% to 6.5%, appears increasingly likely. The dynamics surrounding this decision have shifted significantly since the last MPC meeting in late November 2025, driven by a confluence of international events and local economic performance.

Producer Price Inflation

November 2025
In November 2025, producer price inflation increased to 2.9%, reflecting the same growth rate as the previous month. However, there was no change on a monthly basis compared to October.

Mining Production and Sales

October 2025
In October 2025, mining activity in South Africa saw a year-on-year increase of 5.8%, following a 1.4% rise recorded in September.
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