Retail confidence declined for a second consecutive quarter due to deteriorating business conditions and weaker sales and order volumes, despite a strong rebound in retail sales in April.
Though consumer spending has remained more resilient than expected, signs of strain are beginning to emerge, according to the latest retail survey by the Bureau for Economic Research (BER).
The survey, released on Thursday, shows business confidence in the retail, wholesale and motor sectors fell to 42% in the second quarter from 50% in the preceding three months. While sentiment remains slightly above the long-term average, the BER said the drop reflects rising unease about future conditions as spending momentum softens.
The report comes a day after Stats SA reported a 5.1% year-on-year jump in retail trade sales for April — the strongest growth rate since late 2023. The surge was led by general dealers and clothing retailers, which together contributed more than four percentage points to the overall increase.
On a monthly basis, seasonally adjusted retail sales rose by 0.9% in April, reversing contractions in February and March. For the three months ended April, retail trade sales were up 3.4% compared with the same period a year ago.
Despite these positive numbers, the BER survey has underscored that certain indicators, such as sales volumes and order levels, have weakened causing the retail sales volumes index to drop into negative territory in the second quarter.
The slowdown follows a period of robust activity driven in part by one-off factors such as early access to pension funds. With that boost fading, the BER warned that retailers should brace for softer consumer spending in the second half of the year.
“Similar to the previous quarter, retailer confidence suffered due to deteriorating business conditions and underlying activity indicators, such as sales and volumes of orders placed, though these also remained above long-term average levels,” it said.
“The trend suggests a moderation in retail sales growth, particularly as two-pot withdrawal-fuelled spending winds down.”
Retailers in clothing, textiles and footwear have so far benefited from strong turnover growth and improved profitability, supported by moderate inflation and easing cost pressures, the BER said. However, nondurable retailers, including those that sell food, are facing tighter margins amid limited pricing power.
Consumer inflation was unchanged at 2.8% in May, a five-year low, and below the Reserve Bank’s 3%-6% target band.
“Unfortunately, a rise in the fuel levy and an absence of inflation adjustments to tax brackets in the final national budget will weigh heavily on consumers,” the BER said. “However, mild inflation, favourable oil price dynamics, and less restrictive monetary policy are expected to provide some relief.
“In sum, the retail and motor trade results suggest consumers [are] likely [to have] held up reasonably well in the second quarter. That said, the drop in wholesalers’ sales of consumer goods raises concern that consumer demand, which to date has been surprisingly resilient, might begin to wane in the latter half of the year.”
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