By Siphamandla Mkhwanazi
Retail sales growth decelerated in August, coming in at 2.3% y/y. This marks a sharp drop from 5.7% y/y in July and well below market expectations of a 3.7% expansion. On a month-on-month basis, volume sales declined by 1.3%, partially reversing the 2.3% gains of the previous month. Nevertheless, the total sales volume over the last three months remains 1.2% higher compared to the preceding three months. This suggests that retail activity will likely still make a positive contribution to 3Q25 GDP growth. The overall strength in retail, particularly in non-essential categories, points to improving household purchasing power and balance sheets, alongside a less restrictive monetary policy environment.
Performance by type of retail shops
Volume growth was broad-based across all types of retailers in August, with the exception of specialist Food and beverages retailers. The standouts were Hardware (+8.1%); Other retailers (+7,9%), which include jewellery retailers and online shops; as well as Household Furniture and Appliances, which registered 6.2% growth. General Dealers (+0,8%) - accounting for roughly 44% of total retail trade - had a positive, more modest, rise. The only area of weakness was Food and Beverage specialists (-3.7%), registering their fourth consecutive month of decline. In our view, this likely reflects consumers tightening their belts on certain non-essential or high-frequency purchases. For example, faced with elevated food and beverage inflation, consumers may be shifting to larger general dealers for grocery shopping or bulk-buying, at the expense of specialty food shops. It could also point to underlying pressures in lower-income segments, where inflationary effects are more pronounced.
Outlook
Stronger balance sheets and improving purchasing power are expected to support retail sales in the near term, particularly the apparent shift towards non-discretionary spending. The persistent weakness in food and beverages is concerning, although this trend somewhat contradicts the 3Q25 FNB/BER Consumer Confidence Index, which showed a marked increase in sentiment among lower-income households. That said, the recently announced above-inflation multi-year wage deals in various sectors should help mitigate these financial pressures moving forward.
