South African Retail Confidence Hits Decade-High Despite Emerging Risks

South Africa’s retail sector has reached its highest confidence levels in a decade, fueled by strong consumer spending and motor trade growth. According to the latest Bureau for Economic Research (BER) Retail Survey, sentiment remains broadly positive, even as certain risks begin to emerge.

Retail Confidence Remains Strong

While overall retailer confidence dropped slightly from 54% to 50% in Q1 2025, it remains 10 percentage points above the long-term average. This optimism aligns with recent Stats SA data, which showed a 5.4% year-on-year increase in retail sales during the fourth quarter of 2024.

• Semi-durable goods led the way with a 7.7% increase in sales.

• Non-durable goods followed closely, rising 6.5% year-on-year.

The BER attributes this retail strength to lower inflation, improved consumer confidence, and increased spending from two-pot retirement withdrawals.

Motor Trade Shows Exceptional Growth

One of the standout findings of the BER report is the sharp surge in motor trade confidence, which jumped 29 percentage points to 52%.

This growth was driven by:
Lower interest rates, making vehicle financing more affordable.
Increased spending power, thanks to retirement withdrawals.

Naamsa data confirms that the vehicle sales rebound—which began in late 2024—continued into January and February 2025, signaling improved consumer financial health.

Challenges for Wholesalers and Retailers

Despite the overall positive outlook, not all sectors are thriving. The wholesale sector, which had been the most confident industry for three consecutive quarters, saw a drop in sentiment due to:

Declining sales volumes.
Deteriorating business conditions.
Concerns over US trade policy affecting imports.

Additionally, while semi-durable goods retailers saw record-high confidence levels, non-durable goods and furniture retailers reported declining sentiment.

The BER suggests this may be due to smaller retailers facing tougher conditions compared to major grocery chains.

Inflation and Currency Pressures

Price adjustments in Q1 2025 reflected shifting economic conditions:

• Retail price indices rose significantly, especially for non-durable and semi-durable goods.

• The rand’s depreciation from R17.60/$ to R18.40/$ led to higher import costs.

Outlook for 2025: Uncertainty Ahead?

While retail and motor trade confidence remain strong, the outlook for Q2 2025 is less certain.

The impact of two-pot withdrawals on spending is expected to fade.
The South African Reserve Bank’s decision to hold off on a fourth interest rate cut limits additional economic stimulus.
The 0.5 percentage point VAT increase, which will be phased in over two years, could weigh on consumer sentiment.

Despite these risks, South Africa’s retail sector is experiencing its strongest confidence levels in a decade, with motor trade standing out as a bright spot.

While economic challenges remain, the resilience of consumer spending and vehicle sales suggests that key pockets of strength will continue to support the economy in 2025.

{Source BusinessTech}

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