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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

August 2025
In August, South Africa’s manufacturing output further declined by 1.5%, following a 1.3% decrease in July. This downturn was significantly below market expectations, which had forecasted a 0.3% increase for August. The Purchasing Managers’ Index (PMI) also fell by 1.4 points, from 50.8 in July to 49.5 in August 2025, indicating a less favourable business climate anticipated by manufacturers for the month.

Reviving South Africa’s Economy

A Balanced Path to Growth, Jobs, and Prosperity
South Africa faces significant economic challenges that threaten the nation’s stability and future prosperity. Over the past decade, sluggish growth, high unemployment—particularly among the youth—and infrastructure decay have become critical issues. These problems are compounded by inconsistent policies, energy shortages, and a prevailing uncertainty in the investment climate. The African National Congress (ANC) has recognised this urgency, unveiling a ten-point plan aimed at revitalising the economy. While this approach shows a concerted effort to address systemic issues, a complementary set of reforms proposed in the Alternative Economic Blueprint offers a promising pathway toward sustainable growth, job creation, and economic freedom.

Gold and Foreign Exchange

September 2025
The South African International Liquidity Position, measured by Net Gold and Foreign Exchange Reserves, showed growth in both USD and Rand terms for September 2025.

Private Sector Credit Extension (PSCE)

August 2025
In August 2025, credit demand grew by 5.9%, slightly below the anticipated market prediction of 6.0% for the month. Since the initiation of interest rate cuts in September 2024, there has been a noticeable acceleration in overall credit growth, with most subcategories showing increases, particularly in July.

Internation Trade and Trade Balance

August 2025
International trade measures South Africa’s demand for foreign goods and services relative to its demand for domestically produced products in the global market.
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