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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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The Perfect Storm:

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