By: Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, Koketso Mano
The 1Q25 Quarterly Employment Statistics (QES) continued to show weak formal employment outcomes at the start of 2025. Although a seasonal dip in employment is typical following the festive season, the persistently low aggregate employment levels underscore an economy struggling to absorb its available workforce. This is in line with indications from the Quarterly Labour Force Statistics, which shows an absorption rate of 40%. Currently, the working-age population is nearly 42 million, with around 11 million people employed in the non-agricultural formal labour market. Including informal, private households and agricultural employment, the number extends to 17 million. Concerningly, the youth unemployment rate is surveyed at over 40% and as we celebrate the youth this month, we are left to wonder if there any silver linings?
Formal employment was down by 74 000 q/q (or 0.7%) and 95 000 y/y (0.9%) led by trade and community services. Even as we typically see part-time employment gains during the festive season, most of the jobs lost in 1Q25 were full-time jobs. Nevertheless, we also saw a contraction in part-time employment. This highlights the impact that the constrained economic climate is having on job prospects. Earnings also declined by 4.6% q/q but are still 2.7% higher than a year ago and roughly in line with inflation. The growth in average monthly earnings has outpaced inflation, recording 5.6% y/y. Therefore, while South Africa has had a persistent jobs crisis, incomes have fared more favourably.
It remains important to contextualise these numbers within the post-pandemic trend. While the momentum in employment gains has been disappointing, there has been a recovery from the pandemic impact. Compared to the start of 2020, over 270 000 jobs have been added - translating to 2.6% growth. Earnings, on the other hand, have grown by 32.5%.
This data raises important considerations. With incomes rising faster than employment numbers, this could suggest an exacerbation of the insider-outsider problem, where the average employed individual retains some hope of income preservation, while the marginalised face limited opportunities to enter the formal labour market. In such weak economic conditions, underemployment also tends to be a concern, and post-pandemic trends favouring more time-based employment may leave more people with tighter constraints in making ends meet.
That said, post-pandemic trends have also enabled greater online economic activity and innovation. This shift has allowed more individuals in the informal labour market to participate meaningfully in the economy. For the youth, this has become an important avenue to avoid long-term unemployment. Importantly, it also means the economy does not completely lose out on the benefits of a considerable young population dividend.
Ultimately, government and private sector efforts to support short-term skills development should be cyclical in nature. The removal of structural impediments, such as the quality of education, network sector productivity, and a less stringent business environment, will better support longer-term investment and employment growth. This is the policy direction, and the success of its implementation will be pivotal in shaping how we think about the South African labour market in the years to come.
Week in review
The leading indicator recorded a setback in April, declining by 0.3% m/m to 112.8 points, following a 0.8% increase in March. On an annual basis, the indicator was flat (0.0%), moderating from a 2.1% increase in March. The decline was driven by negative movements in seven of the ten constituent variables, which outweighed the positive contributions from the remaining three. The largest drag came from a deceleration in the six-month smoothed growth rate of real M1 money supply, as well as a decrease in the volume of domestic manufacturing orders. On the positive side, the continued increase in new passenger car sales made the strongest contribution, with its six-month smoothed growth rate accelerating. An increase in the number of residential building plans approved also made a notable contribution to the leading indicator.
The FNB/BER Consumer Confidence Index (CCI) rebounded from -20 to -10 in 2Q25, recovering some ground after a sharp decline in the first quarter. This partial recovery followed a series of economic and political shocks, including proposed VAT hikes, political tensions, load-shedding, and strained US relations. All three sub-indices— economic outlook, household finances, and time to buy durable goods—improved, with the household finances index turning positive. Confidence rose notably among high- and middle-income households, supported by interest rate cuts and pension fund withdrawals, while low-income households saw only a modest improvement due to limited access to credit and rising food inflation. That said, overall consumer sentiment remains subdued relative to historical average of -1 (since 1994), suggesting that consumers are not yet fully confident in the economic prospects.
Producer inflation eased to 0.1% y/y in May, down from 0.5% y/y in both March and April, and significantly lower than the 18.0% y/y recorded in July 2022. On a monthly basis, producer prices declined by 0.3%. Excluding petroleum-related products, producer inflation stood at 2.3% y/y in May, with prices down by 0.2% m/m. Food inflation slowed to 3.0% y/y from 4.9%, driven by a moderating increase in prices of fruit and vegetables, oils and fats, and grain mill products, as well as a decline in dairy prices. Meat and meat product inflation remained elevated at 10.5%, although this marked a slight moderation from 11.0%. Petrol and diesel prices fell sharply, by 18.7% and 15.1%, respectively. Price pressures also softened in non-metallic mineral products and metals. After twelve consecutive months of deflation, inflation in transport equipment turned marginally positive at 0.2% y/y, reflecting a 1.6% increase in motor vehicle prices, while parts continued to decline. Intermediate producer inflation stood at 6.9% y/y but fell by 0.9% m/m.
Week ahead
On Monday, the FNB/BER Civil Confidence Index for 2Q25 will be published. The Civil Confidence Index edged lower in 1Q25, to 45 index points from 48 previously. The slight deterioration was driven by renewed concerns over profitability and current operating conditions, which counteracted improved activity. That said, market participants expected an improved operating environment in the next quarter.
Also on Monday, data on Private Sector Credit Extension (PSCE) for May will be released. PSCE growth rose to 4.6% y/y in April, up from 3.4% y/y in March, largely driven by an acceleration in corporate credit growth, which increased to 6.0% from 3.9%. Household credit growth was 3.0%, marginally higher than the 2.9% recorded in March.
Lastly on Monday, the trade balance for May will be released. In April, the trade balance amounted to a surplus of R14.1 billion, reflecting a compression from the downwardly revised surplus of R22.7 billion (previously R24.8 billion) in March. The April surplus reflected a 1.5% m/m decline in exports to R166.2 billion, while imports declined more sharply by 4.4% m/m to R152.1 billion. Nevertheless, the year-to-date (January to April) trade balance amounts to a surplus of R39.7 billion, higher than the R26.6 billion surplus recorded over the same period last year. This is consistent with our constructive current account deficit forecast of around 0.6% this year, supported by still favourable terms of trade.
On Wednesday, the BER inflation expectations survey results for 2Q25 will be published. Inflation expectations for 1Q25 continued to oscillate around the 4.5% midpoint target. However, there was a slight (0.1ppt) uptick in the one- to five-years ahead expectations. As headline inflation remains soft, we should see further slowing in backward-looking expectations.
Also on Wednesday, the manufacturing PMI for June will be published. The seasonally adjusted manufacturing PMI fell further to 43.1 index points in May, from 44.7 points in April, marking the seventh consecutive month of contraction. While there was some improvement in business activity and new sales order ratings, both remained in negative territory. Fortunately, the index for expected business conditions in the near term increased by 13.9 points to 62.5, highlighting a lift in sentiment as external tariffs have been reduced and local policy uncertainty has abated.
Lastly on Wednesday, data on new vehicle sales for June will be published. New vehicle sales rose sharply by 22.0% y/y to 45 308 units in May, up from a solid 11.8% growth in the previous month. The improvement was broad-based across segments. The new passenger car segment saw a notable 30.0% increase to 31 741 units, with rental sales comprising 8.5% of this figure, reflecting strong consumer demand. Light commercial vehicle sales grew by 5.8% to 10 938 units. Medium- and heavy- truck sales also performed well, with medium trucks up 22.7% to 660 units and heavy trucks and buses increasing by 6.7% to 1 969 units.
On Thursday, data on electricity generated and available for distribution for May will be released. After 16 consecutive months of annual increase, and 1.2% y/y growth in March, electricity production recorded no growth in April. Monthly momentum also slowed in April, with the seasonally adjusted data posting 0.1% m/m growth versus 0.9% in March. The utilities sector has hit a few snags this year and weighed on 1Q25 GDP growth. This highlights the need for continued investment and reform in these key network industries to secure sustained performance improvements going forward.
On Friday, data on South Africa's foreign exchange reserves for June will be released. SA's gross foreign exchange reserves lifted to $68.1 billion in May, up from $67.6 billion in April. The increase in foreign reserves and the international liquidity position was once again due to an increase in gold reserves and there were also market activity and valuation gains. These were countered by foreign currency payments made on behalf of government.
Tables
The key data in review
| Date | Country | Release/Event | Period | Act | Prior |
|---|---|---|---|---|---|
| 24-Jun | SA | Leading business cycle indicator | Apr | 112.8 | 113.2 |
| SA | Formal employment % q/q | 1Q | -0.7 | 0.2 | |
| SA | Formal employment % y/y | 1Q | -0.9 | -0.7 | |
| 26-Jun | SA | FNB/BER Consumer Confidence Index | 2Q | -10 | -20.0 |
| SA | PPI % m/m | May | -0.3 | 0.5 | |
| SA | PPI % y/y | May | 0.1 | 0.5 |
Data to watch out for this week
| Date | Country | Release/Event | Period | Survey | Prior |
|---|---|---|---|---|---|
| 30-Jun | SA | FNB/BER Civil Confidence Index | 2Q | -- | 45.0 |
| SA | Private sector credit extension % y/y | May | -- | 4.6 | |
| SA | Trade balance R billion | May | -- | 14.1 | |
| 2-Jul | SA | Manufacturing PMI | Jun | -- | 43.1 |
| SA | New vehicle sales % y/y | Jun | -- | 22.0 | |
| SA | BER inflation expectations | 2Q | -- | 4.7 | |
| 3-Jul | SA | Electricity production % y/y | May | -- | 0.0 |
| SA | Electricity production % m/m | May | -- | 0.1 | |
| 4-Jul | SA | Foreign exchange reserves $ billion | Jun | -- | 68.1 |
Financial market indicators
| Indicator | Level | 1 W | 1 M | 1 Y |
|---|---|---|---|---|
| All Share | 95,968.26 | 1.10% | 2.40% | 21.10% |
| USD/ZAR | 17.85 | -1.00% | -0.10% | -1.80% |
| EUR/ZAR | 20.88 | 0.70% | 2.70% | 7.50% |
| GBP/ZAR | 24.5 | 0.90% | 1.10% | 6.80% |
| Platinum US$/oz. | 1,422.13 | 9.10% | 30.40% | 40.20% |
| Gold US$/oz. | 3,327.92 | -1.30% | -0.50% | 44.80% |
| Brent US$/oz. | 67.73 | -14.10% | 4.60% | -20.60% |
| SA 10 year bond yield | 9.94 | -1.70% | -5.00% | -11.20% |
FNB SA Economic Forecast
| Economic Indicator | 2022 | 2023 | 2024f | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|---|
| Real GDP %y/y | 2.1 | 0.8 | 0.5 | 1.1 | 1.6 | 1.9 |
| Household consumption expenditure % y/y | 2.6 | 0.2 | 1.0 | 2.4 | 2.0 | 2.1 |
| Gross fixed capital formation % y/y | 5.9 | 3.0 | -3.9 | 0.9 | 2.7 | 3.6 |
| CPI (average) %y/y | 6.9 | 6.0 | 4.4 | 3.5 | 4.3 | 4.3 |
| CPI (year end) % y/y | 7.2 | 5.1 | 3.0 | 4.3 | 4.2 | 4.3 |
| Repo rate (year end) %p.a. | 7.00 | 8.25 | 7.75 | 7.00 | 7.00 | 7.00 |
| Prime (year end) %p.a. | 10.50 | 11.75 | 11.25 | 10.50 | 10.50 | 10.50 |
| USD/ZAR (average) | 16.40 | 18.5 | 18.3 | 18.3 | 18.5 | 18.6 |
