Our weekly podcast by Kevin Lings

US retail sales growth “lacklustre”; companies, not consumers, driving SA credit demand

In this podcast, STANLIB’s Chief Economist, Kevin Lings, examines latest US retail sales data, including Black Friday. Black Friday sales, both in-store and online, were up 4% y/y, which is not particularly buoyant. He also looks at how corporate credit is driving the recent acceleration in SA’s growth in private sector credit.

The focus areas during the week included

• The S&P 500 index gained a robust 3.7% in a holiday-shortened week after declining by 1.9% in the prior week. (US markets were closed on Thursday due to the Thanksgiving holiday.) The market was boosted by dovish comments from some Federal Reserve (Fed) officials and by weaker-than-expected economic reports, which seemed to reinforce the view that the Fed will cut interest rates by 25 bps on 10 December.

• The Nasdaq 100 index also recorded strong gains, rising by 4.9%. This follows a decline of 3.1% in the prior week. Some investors were concerned about elevated valuations and sustained spending on artificial intelligence.

• US equity markets have experienced a rollercoaster ride in 2025.  The S&P 500 fell by 19% from peak-to-trough in April but quickly regained those losses to record a 16.4% year-to-date gain by the end of November. (The S&P 500 has recorded positive gains in eight of the past 11 months, although it was up only 0.1% in November.) Interestingly, December is historically a strong month for US equities. Since 1980, the S&P 500 has delivered a positive return in December 71% of the time, with an average gain of 1.2%. That compares to positive returns 63% of the time for any month, with an average monthly gain of 0.9%.

• The STOXX Europe 600 index gained 2.4%, while Japan’s Nikkei 225 was up 3.4% as Japanese tech and AI-related shares rebounded strongly. Their rebound mirrored the rally in the US, following a sharp sell-off earlier the previous week amid ongoing concerns about overstretched valuations. SA’s All-Share Index ended the week up 1.2%, again supported by the Resources index. Year-to-date the local equity market is up 31.9% in rands.

• In November, the rand gained 1.3% against the US dollar, outperforming the emerging market currency index, which strengthened by a more modest 0.4% against the dollar. However, the rand was only the seventh-best performing emerging market currency in the month. It was outperformed by Mexico, Malaysia, Chile, Hungary, Columbia and Russia. In November the South African Reserve Bank cut interest rates by 25 bps and SA attracted some negative attention from President Trump, which (at the margin) probably undermined the rand’s performance. However, domestic economic fundamentals have improved in recent months and are providing some underlying support to the rand. In the year to date, the rand has gained 9.7% against the dollar, while the emerging market currency index is up 8.3%.

• US weekly jobless claims were recorded at 216 000 for the past week. This was below market expectations of 230 000 claims and also below the prior week’s reading of 222 000 claims. Continuing jobless claims were little changed from the previous week at 1.96 million. Despite a clear moderation in the number of jobs added in the past five months, initial jobless claims remain well below the 30-year average of roughly 364 000 and are also below the 2015–2019 average of about 245 000. This suggests that, while US companies have slowed the pace of hiring, they have not embarked on widespread job cuts – which is key for economic and market stability.

• Fed Governor Chris Waller and San Francisco Fed President Mary Daly raised  concerns about the US labour market, which was interpreted as providing support for a December rate cut. This follows earlier comments (about a week ago) from New York Fed President John Williams, who is seen in markets as an influential voice on the Federal Open Market Committee (FOMC), in favour of a December rate cut. These speeches, together with softer-than-expected retail sales data for September and weak consumer confidence, helped to push market expectations for a 25 bps cut on 10 December to around 86% from 70% a week ago and from a low of about 30% just 10 days ago. However, a rate cut in December is not guaranteed, as the minutes of the 29 October FOMC meeting indicated that many members are uncomfortable with cutting rates in December, US weekly jobless claims remain low and recent retail activity reports indicate that online retail sales surged by 9.2% y/y on Black Friday. Interestingly, Mastercard SpendingPulse reported a 4.1% y/y increase in total retail sales on Black Friday, which measures both in-store as well as online activity.

• US retail sales grew by 0.2% m/m in September (4.3% y/y), below market expectations for growth of 0.4% m/m. (The October retail sales data release was delayed due to the federal government shutdown.) Vehicle sales declined by 0.3% m/m, while sales of household appliances were down 0.5% m/m and clothing sales fell by 0.7% m/m. In contrast, purchases of gasoline rose by 2% m/m, partly due to a 1% increase in the gasoline price in the month. (US retail sales are reported in nominal terms.) Overall, retail activity appears to have softened in September after strong gains in the prior few months – particularly in motor vehicles.

• US consumer confidence (as reported by The Conference Board) fell sharply in November, with the index dropping by 6.8 points to 88.7, the lowest level since April 2025. According to Dana Peterson, chief economist at The Conference Board, “all five components of the overall index flagged or remained weak,” with consumers’ citing “prices and inflation, tariffs and trade, and politics” as the leading causes of the more negative outlook.

• US durable goods orders rose by 0.5% m/m ($1.5 billion) in September to $313.7 billion, in line with market expectations, but down from revised growth of 3% m/m in August. Excluding transportation, new orders increased by 0.6% m/m, while excluding defence, new orders increased by only 0.1 percent. There was a further significant increase in orders for “communication equipment” – which probably reflects ongoing robust spending trends linked to the development of AI infrastructure.

• US producer inflation was unchanged at 2.7% y/y in September, slightly above market expectations for a modest decline to 2.6% y/y. Energy prices were a key contributor, rising 3.5% y/y. In contrast, core PPI inflation slowed to 2.6% y/y in September from 2.9% y/y in August and below market expectations for a moderation to 2.7% y/y. While headline PPI inflation remains elevated, the core rate of producer inflation continues to moderate, signaling that US inflationary pressure is contained, although at a level that is persistently above target.

• On Wednesday, the Fed released its Beige Book – a report published eight times a year, in which each of the Fed’s 12 regional banks gathers information and data about economic conditions in its district. Regional banks saw little change in overall economic activity across most of the 12 districts, while “employment declined slightly” and prices “rose moderately,” with input cost pressures “widespread in manufacturing and retail, largely reflecting tariff-induced increases”. The report also noted that “consumer spending declined further,” although “higher-end retail spending remained resilient”.

• The US has proposed a 28-point peace plan to resolve the war in Ukraine’s Donbas region, and to establish a broader European and global security framework. The plan was presented to and discussed with European Union and NATO member states, as well as Ukraine. Although the discussion resulted in an updated and refined peace framework, it does not really differ in substance from the initial plan put forward by the US. It aims to rebalance the peace agreement towards a more equal standing between Ukraine and Russia. It is still unclear if a lasting peace deal will be concluded.

• SA’s trade surplus narrowed from R22.25 billion in September 2025 to R15.58 billion in October 2025. The decline was mainly due to a 7.2% m/m increase in imports. This included a R4 billion increase in oil imports and a R3.5 billion rise in imports of vehicle and vehicle parts. In contrast, exports rose by a more modest 2.8% m/m, hurt by a massive R5.6 billion decline (-35% m/m) in vegetable exports. Fortunately, this was offset by a R8.5 billion increase in exports of precious metals and a R3.5 billion rise in coal exports. For the first ten months of the year, SA recorded a trade surplus of R142.7 billion, which is down 3.6% (R5.3 billion) from the surplus recorded during the first ten months of 2024. Interestingly, exports to the US declined by 7.9% y/y (R10.4 billion) in the first ten months of 2025, which is understandable given higher US import tariffs and the ending of the AGOA agreement.

• SA’s private sector credit grew by a more robust 7.3% y/y in October 2025 compared with growth of 6.1% y/y in September 2025. The increase was well above market expectations for a rise of 6.3% y/y. The larger-than-expected rise was mainly driven by corporate credit, which rose by 10.3% y/y in October, supported by ongoing investment in renewable energy projects. In contrast, growth in household credit was subdued at only 3.1% y/y – with residential mortgage advances increasing by just over 2% y/y in recent months.

• Tokyo’s core inflation rate was unchanged at 2.7% y/y in November 2025. This was in line with market expectations and supported analyst’s expectations that the Bank of Japan could increase interest rates in the coming months. This view has gained additional support from a range of stronger-than-expected economic activity data for October, including industrial production, retail sales, and a steady unemployment rate. These developments have also helped to reinforce confidence that Japan is progressing towards a more durable inflation backdrop.

• Profits in China’s industrial sector unexpectedly fell by 5.5% y/y in October. This follows increases of more than 20% in each of the prior two months, supporting the idea that China’s economy lost some momentum in Q4 2025. Earlier this month China reported that its producer price index remained in negative territory (-2.1% y/y) in November for the 37th consecutive month, even after Beijing launched its so-called anti-involution campaign. The campaign is aimed at curbing price wars and excessive output in industries from food delivery to car manufacturing.