Although the total wage bill grew by a lower-than-expected 6.4% y-y in 2025, households benefited from lower transport costs (-2.2% y-y) and debt service costs (-0.2% y-y). Two-Pot pension withdrawals moderated, with gross long-term insurance claims rising by only 1.0% y-y. This resulted in funds available for retail and discretionary spending increasing by 6.9% y-y in 2025 (6.2% y-y adjusted for Two-Pot pension withdrawals). Retail sales growth of 6.1% y-y was in line with growth in the Consumer Wallet (funds available for retail and discretionary spending), reversing the prudent consumer savings trend of the past two years. Looking ahead, we expect job growth of 1.5% y-y and wage increases of 5.5% y-y, resulting in a 7.0% y-y increase in the wage bill in 2026. Lower interest rates should continue to provide relief, with debt service costs expected to drop by 0.5% y-y, while transport costs could fall by 4.3% y-y, aided by a stronger rand and low oil prices. We estimate that the Consumer Wallet could increase by 9.4% y-y in 2026. Despite the relatively robust consumer finances in 2025, some discretionary retailers have reported challenging market conditions, attributing them to significant consumer pressure. We argue that other factors may be at play, including the growth of online gambling and shifts in the employment base. We show that there were 500 000 fewer workers under the age of 35 in 2025 than in 2008 despite the total number of employed increasing by 2.5m. This is a key target market for clothing retailers, and the lack of growth in economically active consumers in this segment could weigh on the sector. However, stronger job growth in older age segments could support the homeware, furniture, and home improvement categories.
