Economics Weekly
By: Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, Koketso Mano
This week's data releases offered further insight into inflation and consumer spending dynamics. While headline inflation remained stable, underlying pressures suggest persistent risks. At the same time, a notable rebound in April retail sales provided a temporary boost and supports our view of a consumer-led economic recovery. These developments come as attention turns to the upcoming July Monetary Policy Committee (MPC) meeting, with monetary policy likely to remain on hold amid ongoing uncertainty.
Headline CPI remained steady at 2.8% y/y in May as fuel disinflation continued to ease price pressures. However, this was offset by a rise in food inflation, particularly meat, fruit, and vegetables, driven by supply disruptions. Core inflation held steady at 3.0%, reflecting subdued demand, with durable goods and transport services still in deflation. Fuel prices dropped sharply, but risks from a weaker rand and rising global oil prices could reverse this trend. Despite current disinflation, geopolitical tensions and trade uncertainty ahead of the July MPC meeting suggest that the South African Reserve Bank (SARB) will likely maintain a cautious stance and hold rates.
Retail sales rose by 5.1% y/y in April, up from 1.2% in March. On a monthly basis, retail volumes rebounded by 0.9% following a 0.3% decline in March. Despite April's strong performance, retail activity over the past three months remains 0.5% lower compared to the preceding three-month period, suggesting that household spending may be losing momentum. The spike in annual sales likely reflects holiday-related spending and two-pot pension withdrawals coinciding with the new tax season.
Week ahead
On Tuesday, the leading indicator will be released. In March, the leading indicator rebounded to 1.1% m/m, from a 0.2% decline in the previous month. The most significant positive influences were a faster growth rate in the real M1 money supply and a rise in the number of approved residential building plans. Conversely, the largest negative influences were slower growth rates in new passenger vehicle sales and the composite leading business cycle indicator for South Africa's major trading partners.
On the same day, employment figures for the formal non-agricultural sectors (Quarterly Employment Survey) for 1Q25 will be released. In 4Q24, employment rose by 12,000 jobs, or 0.1% q/q. Most of the job gains were in the trade sector, while the community services sector continued to shed jobs. Compared to 4Q23, over 90,000 jobs (0.8%) have been lost, although more than 330,000 jobs have been added since 4Q19. Total gross earnings increased by 6.1% q/q and 3.6% y/y.
On Thursday, the FNB/BER Consumer Confidence Index (CCI) will be published. The CCI dropped sharply in 1Q25, falling by 14 points to -20-its lowest level since early 2023. The decline was triggered by concerns over possible tax hikes, including a proposed VAT increase, which unsettled consumers during the survey period. Although the revised budget softened the VAT proposal, the overall tax burden remained high. Tensions between South Africa and the United States, along with global trade disruptions, further weighed on sentiment. A brief return of stage six load-shedding added to the negative outlook, marking a significant shift in consumer mood after a strong end to 2024.
Producer inflation data for May will also be released on Thursday. Producer inflation remained subdued at 0.5% y/y in April, unchanged from the March reading. On a monthly basis, prices rose by 0.5%, slightly lower than the 0.6% recorded in March. Excluding petroleum-related products, producer inflation stood at 2.5% y/y, up from 2.2% in March, with a monthly increase of 0.9%. Food products inflation rose to 4.9% from 4.7%, largely reflecting a sharp rise in meat inflation to 11.0% from 4.6%, as well as a notable increase in oils and fats inflation to 7.7% from 4.7%. Inflation in textiles climbed to 6.8% from 6.0%, while furniture inflation rose to 8.5% from 7.2%. However, continued deflation in fuel, paper products and transport equipment helped keep overall producer inflation contained in April.
Tables
The key data in review
| Date | Country | Release/Event | Period | Act | Prior |
|---|---|---|---|---|---|
| 18 Jun | SA | CPI % y/y | May | 2.8 | 2.8 |
| SA | CPI % m/m | May | 0.2 | 0.3 | |
| SA | CPI Core % y/y | May | 3.0 | 3.0 | |
| SA | CPI Core % m/m | May | 0.0 | 0.1 | |
| SA | Retail sales % y/y | Apr | 5.1 | 1.2 | |
| SA | Retail sales % m/m | Apr | 0.9 | -0.3 |
Data to watch out for this week
| Date | Country | Release/Event | Period | Survey | Prior |
|---|---|---|---|---|---|
| 24 Jun | SA | Leading indicator | Apr | -- | 115.4 |
| SA | Non-Farm Payrolls % q/q | 1Q | -- | 0.1 | |
| SA | Non-Farm Payrolls % q/q | 1Q | -- | -0.8 | |
| 26 Jun | SA | FNB/BER Consumer Confidence | 2Q | -- | -20.0 |
| SA | PPI % y/y | May | -- | 0.5 | |
| SA | PPI % m/m | May | -- | 0.5 |
Financial market indicators
| Indicator | Level | 1 W | 1 M | 1 Y |
|---|---|---|---|---|
| All Share | 94,914.70 | -2.20% | 2.60% | 17.60% |
| USD/ZAR | 18.03 | 1.40% | -0.30% | 0.40% |
| EUR/ZAR | 20.73 | 0.70% | 2.00% | 7.50% |
| GBP/ZAR | 24.28 | 0.30% | 0.50% | 6.30% |
| Platinum US$/oz. | 1,302.92 | 0.30% | 30.00% | 32.80% |
| Gold US$/oz. | 3,370.90 | -0.40% | 4.40% | 44.80% |
| Brent US$/oz. | 78.85 | 13.70% | 20.30% | -7.30% |
| SA 10 year bond yield | 10.12 | 0.30% | -3.40% | -9.90% |
FNB SA Economic Forecast
| Economic Indicator | 2022 | 2023 | 2024f | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|---|
| Real GDP %y/y | 2.1 | 0.8 | 0.5 | 1.1 | 1.6 | 1.9 |
| Household consumption expenditure % y/y | 2.6 | 0.2 | 1.0 | 2.4 | 2.0 | 2.1 |
| Gross fixed capital formation % y/y | 5.9 | 3.0 | -3.9 | 0.9 | 2.7 | 3.6 |
| CPI (average) %y/y | 6.9 | 6.0 | 4.4 | 3.5 | 4.3 | 4.3 |
| CPI (year end) % y/y | 7.2 | 5.1 | 3.0 | 4.3 | 4.2 | 4.3 |
| Repo rate (year end) %p.a. | 7.00 | 8.25 | 7.75 | 7.00 | 7.00 | 7.00 |
| Prime (year end) %p.a. | 10.50 | 11.75 | 11.25 | 10.50 | 10.50 | 10.50 |
| USD/ZAR (average) | 16.40 | 18.5 | 18.3 | 18.3 | 18.5 | 18.6 |
