Siphamandla Mkhwanazi | November retail sales exceed expectations

22-01-25 / Siphamandla Mkhwanazi

Siphamandla Mkhwanazi | November retail sales exceed expectations

After a solid 6.2% y/y in October, retail sales accelerated further to a robust 7.7% growth in November, significantly outpacing the Reuters consensus expectation for a 5.5% increase. Excluding the disruptions caused by Covid-19 and the July 2021 riots to the data, this marks the strongest print in approximately 14 years (since June 2010). On a month-on-month basis, volumes increased by 0.8%, albeit down from a 1.6% increase in September.

These numbers bode well for 4Q24 GDP growth and reflect consumer spending benefits from the two-pot system pension withdrawals, the declining inflation trajectory, particularly fuel costs, as well as improved consumer sentiment.

Retail sales outlet performance

The uptick in shopping activity was broad-based across most retailers, led by general dealers who saw an impressive 11.9% y/y increase, contributing 5.2ppts to the headline number. This was followed by clothing and footwear as well as household furniture sales, which saw a 9.5% and 9.4% increase in November, contributing 1.7ppts and 0.5ppts, respectively.

Food and beverages increased by 3.8%, (0.3ppts) and pharmaceuticals by 3.7% (0.2ppts). All other retailers increased by 0.7%, adding 0.1ppt to the headline figure. By contrast, hardware retailers recorded a further decline of 4.3%, detracting 0.4ppts.

Outlook

Year-to-date, retail sales have increased by 2.4% compared to the same period last year, the highest level since 2019. This reflects a gradual improvement in the consumer environment. We expect this momentum to continue into 2025, supported by a recovery in household incomes, as wages accelerate and inflation abates; lower borrowing costs; improved domestic political risk and consumer sentiment.

These factors should contribute to stronger asset prices, bolstering consumer balance sheets and further supporting retail sales growth.