This week, the South African data card heats up with a number of prints scheduled for release. Of those on offer, the Q2 unemployment rate and the retail sales figure for June will attract the most attention. Although it is a lagging indicator, the unemployment rate will provide an update on how the labour market is faring in South Africa. Although consensus expectations are for a lower unemployment print, tight financing conditions, slow economic growth, and political uncertainty likely limited hiring activity through the second quarter. With the GNU having now formed and expectations that the SARB will cut interest before year’s end, potentially starting in September, hiring activity may improve. Yet, structural headwinds such as red tape, ongoing infrastructure degradation and a weak global economic backdrop will continue to limit employment levels in South Africa.
On the consumption front, the retail sales update serves as an important indicator for South African growth prospects, given the economy’s dependence on consumptive activities. Looking at the seasonally adjusted rand value, retail sales have hobbled along post-Covid, as high inflation levels and elevated interest rates have acted as major headwinds that have weighed on South African households. While the June figure is expected to post a marginal improvement over the previous month as some uncertainty associated with the National Election eased, retail growth is expected to remain subdued amid tight monetary conditions that continue to limit purchasing power. However, looking ahead, the retail sector will likely experience more demand owing to improved consumer confidence due to GNU optimism. Additionally, with SARB rate cuts expected to start in the coming months, retail sales will likely improve.