By Siphamandla Mkhwanazi
Retail sales growth increased to 2.6% year-on-year (y/y) in March, up from 1.6% in February, broadly in line with market expectations of a 2.5% expansion. On a month-on- month (m/m) basis, sales volumes edged up by 0.1%, recovering from a 1.1% decline in the previous month. As a result, volume sales for 1Q26 were flat, suggesting that the retail sector made no meaningful contribution to GDP growth in the quarter. Importantly, this data largely predates the sharp fuel price increases linked to escalated tensions in the Middle East, which are likely to dampen sentiment and weigh on consumer activity going forward.
Where consumers are spending
Spending activity increased in six of the seven retail categories. Pressure on specialist food and beverage retailers persisted, with sales declining by a further 5.6% y/y (from -5.3%), marking a fourth consecutive annual contraction.
At the other end of the spectrum, general dealers recorded a rebound in activity, with volumes growing by 1.7% y/y, contributing 0.8-percentage points (ppts) to headline growth. “Other” retailers also posted robust growth of 7.1% y/y, albeit slightly slower than the 9.9% expansion in February, contributing 0.7ppts. Clothing and footwear provided some support, although growth moderated to 4.0% from 4.2% in the prior month. Activity at pharmaceutical and cosmetic retailers remained relatively firm at 5.4% (down from 6.4% previously). Furniture retailers continued to post strong growth of 11.3%, up from 8.8% in February, while hardware and building material sales remained subdued at 0.3% y/y.
Outlook
Consumers entered 2026 on a firmer footing, supported by improving purchasing power, stronger balance sheets, and lower borrowing and debt-servicing costs. This backdrop helped lift consumer sentiment, particularly among higher-income households.
Looking ahead, however, a less supportive external environment and tighter financial conditions are likely to weigh increasingly on domestic demand. Rising operating costs, particularly via higher oil prices, alongside heightened uncertainty, could compress margins and dampen investment through weaker confidence. In turn, this may translate into softer employment and income growth, constraining household spending. Nevertheless, consumers are still expected to support GDP growth in 2026, albeit at a slower pace than initially anticipated.
