SARS revealed that South Africans have withdrawn R35.1 billion from retirement funds since the new two-pot pension system laws came into effect three months ago. The high demand for early access to pension savings, which has exceeded National Treasury’s forecasts, reflects financial pressures on households as they prioritise liquidity over long-term retirement security. While the SARB projects that these withdrawals could provide short-term economic stimulus and add up to 0.3 percentage points to the country’s GDP growth this year, particularly supporting retail and services demand, these withdrawals pose a significant risk to longer-term financial sustainability in the country. Moreover, savings play a central role in driving investment and capital accumulation in an economy, which, in turn, determine longer-term economic growth.
Today, CPI data for October and retail sales numbers for September will provide an update on short-term economic growth momentum in South Africa. The CPI data are expected to show headline inflation declined sharply to the floor of the SARB’s 3%-6% target range at the start of Q4, continuing a broader disinflationary trend. This slowdown will likely result from further decreases in fuel prices on a year-on-year basis. However, falling fuel inflation will lose momentum in November due to statistical base effects, while core inflation suggests that most other CPI categories also seem to be bottoming out. Consequently, inflation could well start to pick up in the final months of the year. Nonetheless, weaker inflation has strengthened the argument for another SARB rate cut when policymakers convene on Thursday. As for retail sales, consensus expectations are for a slightly softer but still robust growth rate of 2.7% y/y, with growth expected to persist in the months ahead as softer inflation, looser monetary policy, and GNU-related consumer optimism support demand.