We have updated our Consumer Wallet model, which measures growth in consumer spending power and serves as a proxy for the likely level of retail sales growth this year.
We cut our job growth forecast for 2025 from 3.1% y-y to 0.5% y-y, which could result in 82 000 new jobs. This is due to weak momentum in the latest Labour Force Survey (LFS). However, the Quarterly Employment Survey (QES) shows robust wage hikes, and we raise our average wage increase forecast from 5.0% y-y to 6.0% y-y.
National Treasury is targeting a rise in personal tax collections of 8.6% y-y in 2025, which could increase the tax burden on consumers. However, consumers stand to benefit from lower debt repayments and lower transport costs.
Based on the latest estimates, consumer spending power in 2025 may be lower than our initial forecast, with a 7.0% y-y increase in funds available for retail and discretionary spending (previously 9.6% y-y). We also expect drawdowns from the Two-Pot retirement system to be lower in 2025, and Consumer Wallet growth adjusted for this impact could be 6.5% y-y.
Our sensitivity analysis indicates the potential for decent Consumer Wallet expansion despite low job growth, due to stronger wage increases, lower debt repayments and reduced transport costs