SA’s retail sector has seen a surge in business confidence, marked by improved economic conditions and growing consumer optimism.
According to the latest data from Stats SA, retail trade sales increased 0.9% year on year in September, showing growth despite persisting economic challenges.
Stats SA said the increase was supported by general dealers’ sales ,which increased 4.5% and contributed 2.1 percentage points to the overall growth.
“The largest negative contributor was retailers in textiles, clothing, footwear and leather goods (minus 5.5% and contributing minus 0.9 of a percentage point),” it said.
Seasonally adjusted retail sales decreased 0.8%. Stats SA said the positive were general dealers and retailers in textiles, clothing, footwear and leather goods, while the negative contributor were retailers in hardware, paint and glass.
Business confidence in the retail sector is at its peak, with the retail confidence index climbing to 54 points in the fourth quarter of 2024, up from 45 points in the previous quarter.
This marks the first time since 2007 that a majority of respondents have reported better business conditions compared with the previous year. The strong confidence is boosted by a decrease in inflation, the start of an interest rate cutting cycle, and improving consumer sentiment.
Retailers are upbeat about the near future, with optimism extending into the first quarter of 2025. The recent improvement in consumer goods wholesalers, which drove a sharp nine point rise in their confidence to 60 points, is also a testament to the strengthening of business conditions. Both sectors are expected to experience favourable conditions into the next year, with room for further growth.
The retail sector’s optimism aligns with broader economic trends, particularly in inflation and fuel prices. Stats SA said inflation has eased to 2.8% in October, its lowest level since June 2020, thanks to falling fuel prices. Petrol and diesel prices dropped by more than 5% compared with September and are nearly 20% lower year on year, providing relief to consumers.
Experts predict that the Reserve Bank is likely to cut interest rates further, boosting purchasing power and consumer confidence.
“The tide is turning. We’ve seen the first interest rate cut, inflation is significantly lower and it helps particularly that fuel prices are nearly 20% lower than a year earlier, and so in due course we’d expect these headwinds that turned into tailwinds to support better consumption,” said Elna Moolman, Standard Bank Group head of SA Macroeconomic Research.
More than R35bn has been withdrawn from pension funds since the implementation of the two-pot retirement system in September.
While it remains unclear how much the system has directly influenced consumption, Moolman said the funds could provide a boost in the months to come, either by supporting additional spending or facilitating debt repayment.
“Generally we’re seeing a couple of tailwinds for the consumer in the coming months, and so we’d expect an improvement in retail sales as well,” she said.
With Kabelo Khumalo.
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