South Africa's retail sales surge 5.6% in July as consumer spending rebounds

South Africa’s retail sales climbed by 5.6% year-on-year in July 2025, the fastest pace in three months, Statistics South Africa (Stats SA) reported on Wednesday.

The rebound follows a modest 1.7% increase in June and reflects stronger spending across most categories.

Stats SA's deputy director for distributive trade statistics, Raquel Floris, said five of the seven retail trade groups registered gains.

"Textiles and clothing increased by 10.0% and general dealers by 3.3% year-on-year. Together, both retail groups pushed overall growth up by 3.1 percentage points," Floris said.

"Retailers in food and beverages and pharmaceuticals and medical goods registered a weaker month, both recording a year-on-year decline in sales."

Food and non-alcoholic beverages inflation recorded 5.2% year-on-year, down from 5.7% previously. Monthly deflation of 0.1% reflected meat and non-alcoholic beverages inflation that was mitigated by cereals and vegetables deflation.

General dealers saw the largest statistical base effect on a -10.9% contraction in July 2024, without which it would have contracted by -8.0%, detracting from instead of adding 1.4% to the overall outcome.

On a monthly basis, seasonally adjusted retail trade sales rose by 2.1% in July,  marking the strongest increase since December 2023, following a revised 0.1% contraction in June and a 0.4% fall in May.

For the three months ended July, retail sales were up 3.8% compared with the same period in 2024.

Koketso Mano, senior economist at FNB, said July’s stronger retail performance coincided with modest inflation pressures.

Mano said that considering the latest data, they see headline inflation lifting slightly to 0.2% month-on-month and 3.4% year-on-year in September.

"There will be some core inflation pressures, as new housing inflation data becomes available. This is while average fuel prices continue to detract from monthly headline pressures," Mano said.

"Fading positive base effects should support inflation, almost touching 4% in the last quarter of this year. This should complicate expectations of further monetary policy easing this year."

Stats SA’s third quarter inflation expectations survey showed long-term price expectations easing to 4.2%, their lowest since 2011.

However, Mano warned that business and labour groups remain anchored above 4%, highlighting “some rigidity in shifting towards the Reserve Bank’s de facto 3% target.”

Dr Elna Moolman, Standard Bank’s head of South Africa macroeconomic research, said household spending was being buoyed by a mix of temporary supports.

"A number of tailwinds are supporting consumers, including low inflation, lower interest rates, renewed access to their two-part retirement savings and employment created in the public sector," Moolman said. 

"These tailwinds counteract the negative impact on household spending power from not adjusting personal income tax thresholds for inflation in this year's budget. Some of the tailwinds for consumers will fade in the coming months, with inflation, for example, already slightly higher than it was just a few months ago."

Moolman cautioned, however, that some of these supports will fade in coming months, particularly as inflation edges higher and fiscal drag erodes disposable income.

"There should at some stage be further interest rate relief, and we remain relatively constructive about the outlook for consumption," she said.

According to the Bureau for Economic Research, confidence amongst retail traders overall declined in the third quarter, although “there are some pockets of strength, with the higher-income consumers still doing relatively well”.

Investec economist, Lara Hodes, said consumers have benefitted from a low inflationary environment and monetary easing, with the total decrease in interest rates at 125 basis points so far since the start of the easing cycle.

Hodes pointed to PayInc real take-home pay in July, which was still above levels in the same period last year and also stressed that industry information was indicating “an average salary increase above 5%”.

"While this is favourable for household consumption expenditure growth which makes up two-thirds of GDP, domestic challenges and global uncertainty around tariffs continue to weigh on consumer confidence, with levels subdued," Hodes said.

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