By Siphamandla Mkhwanazi, FNB Senior Economist
Consumer spending slowed sharply in 1Q25, with retail sales rising just 1.5% y/y in March, down from 4.1% in February (revised up from 3.9%). This was well below market expectations of a 3.1% increase, signalling that shoppers are becoming more cautious. On a monthly basis, sales volumes dipped by 0.2% in March, following a steeper 1.2% drop in February. Overall, retail activity grew just 0.1% q/q in 1Q25, a significant slowdown from the 2.0% growth in the final quarter of 2024. This suggests that household spending is losing momentum, which could weigh on broader economic growth.
Where consumers are spending less – and more
 Spending patterns varied across store types:
- Food retailers saw the biggest drop, with sales down 2.6% y/y in March from another 3.6% decline in February – a sign that consumers may be cutting back, even on essentials.
- General dealers and clothing stores also lost steam, with growth slowing to 0.3% and 3.5%, from 3.6% and 16.1%, respectively.
- On the upside, pharmacies and hardware stores rebounded, with sales rising 7.1% and 2.5% y/y (from -0.2% and -3.8% previously), suggesting some resilience in health and home improvement spending.
Outlook
Despite the March slowdown, retail sales for the first quarter were up 4.1% y/y– the strongest start to a year since 2018. This reflects improved household finances, supported by lower inflation and reduced borrowing costs. However, the sharp deceleration in March points to growing consumer caution, likely due to fading support from once-off large-scale two-pot pension withdrawals, as well as rising uncertainty both at home and abroad. Looking ahead, consumer spending is still expected to drive growth in 2025, but at a slower pace than previously forecast. The outlook is clouded by global trade tensions, local political uncertainty, and weaker local growth which may weigh on employment.
