South African retail sales growth slowed to 3.9% y/y in February from 7.0% y/y in January. The latest figure came in well below market expectations, with Bloomberg’s median survey estimate projecting a 6.6% y/y growth rate. Nevertheless, February’s 3.9% print marked 12 consecutive months of growth in the retail sector. Despite the slowdown in February, the retail sector remains one of South Africa’s few growing industries, easily outperforming industrial sectors. This can be attributed to improved consumer confidence, strong growth in real wages, two-pot retirement withdrawals, and slower inflation.

However, looking ahead, consumer confidence may have taken a knock following the budget fiasco between the DA and the ANC and the incoming VAT hike. Furthermore, the SARB believes that the lion’s share of two-pot withdrawals has been completed and that around 75% were used for spending purposes, while only 25% were directed to repaying outstanding debt. Finally, increased global uncertainty related to US President Trump’s erratic trade policies suggests that the SARB will err on the side of caution, potentially limiting further interest rate cuts domestically.

ZAR Markets

The rand was able to capitalise on a broad-based dollar retreat yesterday, with the USD-ZAR trading back below the 19-handle to 18.8000 before attracting some stronger buyer interest. The ZAR has recovered nicely from levels around 19.9300 just a week ago as the market cheered signs that the GNU will remain intact. However, it may not be out of the woods yet, with tensions between the ANC and DA still evident. The DA has laid corruption charges against Human Settlements Minister Thembisile Simelane, which could add to these tensions and raise questions about President Ramaphosa’s ability to root out corruption. Furthermore, Finance Minister Enoch Godongwana has said he sees no alternative to a VAT increase, meaning the budget impasse could flare up again in the coming weeks and cause more volatility in the market.

Global FX Markets

Federal Reserve Chair Jay Powell warned that Donald Trump’s sweeping tariffs risk undermining the Fed’s dual mandate of price stability and full employment. Speaking to the Economic Club of Chicago, Powell stated that the tariffs were “significantly larger than anticipated” and would likely lead to higher inflation and slower growth, making it harder to maintain economic balance. He noted the U.S. central bank is caught in a “challenging scenario” where rising prices may conflict with efforts to maintain strong labour markets. While the Fed’s 2% inflation target remains its priority, Powell emphasized that “without price stability, we cannot achieve long periods of strong labour market conditions.” Markets responded negatively to his remarks, with the S&P 500 falling 2.2% as investors absorbed the implications of prolonged inflation and uncertain monetary policy. Other Fed officials, including John Williams and Christopher Waller, echoed concerns, noting inflation is expected to rise in the coming months. While Waller believes the impact may be short-lived, others see a greater risk of persistent inflation, driven by tariffs. The Fed’s preferred inflation gauge, the PCE index, rose 2.5% year-on-year in February, above target. Surveys also indicate businesses and consumers are bracing for stronger price increases. As a result, the Fed remains in “wait and see” mode, holding its policy rate at 4.25–4.5%, while monitoring how tariffs affect the broader economy.