Retail activity in South Africa kicked off 2025 with its best foot forward in January as consumers continued to benefit from a favorable economic environment leading them to have more spending power.
Data released by Statistics South Africa (Stats SA) on Wednesday revealed that retail trade sales, measured in real terms (constant 2019 prices), soared by 7.0% year-on-year, outpacing Bloomberg consensus forecasts of market expectations of a 3.9% hike.
This follows a solid 3.2% increase in December 2024, signaling sustained momentum in consumer spending.
The uptick was widespread, with all seven categories in the retail basket posting gains compared to January 2024. Leading the charge were general dealers, which recorded an 8.4% increase, contributing 3.6 percentage points to the headline figure. This category, accounting for over 40% of the retail index, underscored its outsized influence on the result.
Retailers in textiles, clothing, footwear, and leather goods followed closely, with a 10.1% jump adding 1.6 percentage points to the total. Even the historically sluggish hardware, paint, and glass segment turned a corner, rising by 2.1% year-on-year, hinting at a pickup in related activity.
On a seasonally adjusted basis, retail trade sales grew by 1.2% in January compared to December 2024, rebounding from a 0.4% dip in the prior month and building on November 2024’s 1.0% gain. Over the three months ended January 2025, sales advanced by 5.7% compared to the same period a year earlier, with general dealers (7.0%, contributing 3.0 percentage points) and textiles, clothing, footwear, and leather goods (9.4%, contributing 1.9 percentage points) again driving the growth.
Seasonally adjusted three-month sales rose by 2.1% against the previous three months, led by general dealers (2.4%, contributing 1.1 percentage points) and the textiles category (4.0%, contributing 0.7 of a percentage point).
Lara Hodes, an economist at Investec, noted the strength of the January figures, describing the 7.0% year-on-year increase as “notable” and well above consensus projections.
“The retail sector experienced another strong quarter,” she said, citing the latest RMB/BER Business Confidence Index for Q1 2025, which climbed to 50 - above its long-term average.
“Sales volumes remained positive for a second consecutive quarter, supported by a reduction in load-shedding-related costs for retailers and a lower inflationary environment boosting real incomes for consumerism,” she said.
Additional tailwinds included monetary easing, with further interest rate cuts expected later in 2025, and withdrawals from the two-pot retirement system, which have bolstered household spending.
BankservAfrica data highlighted a significant boost in purchasing power, with real take-home pay rising to R15,659 in January 2025: a 12.8% increase from a year ago and the highest level since February 2022.
However, Hodes cautioned," Going forward, the projected VAT increase outlined in the budget combined with no adjustment for bracket creep could, however ,weigh on consumers and overall spend, with many households still largely constrained despite the slide in inflation and interest rates."
BUSINESS REPORT