By Siphamandla Mkhwanazi
Retail sales growth accelerated to 2.3% year-on-year (y/y) in May, up from 1.2% in April (revised from 1.3%) and well above market expectations of a 1.9% expansion. On a month-on-month (m/m) basis, however, sales volumes slowed to 0.1% from 0.8% in the previous month. The release suggests that consumers remained resilient at the start of the second quarter despite sharp fuel price increases linked to tensions in the Middle East. Internal data indicates that households responded by cutting fuel expenditure, likely through reduced travel, helping to preserve discretionary spending power.
Where are consumers cutting spending?
All but two retail categories recorded positive annual sales growth. Specialist food and beverage retailers continued to underperform, with volumes declining by 0.4% y/y, unchanged from the previous month. Consumers also curtailed spending on building materials, with hardware store sales contracting by 0.4% y/y after marginal growth of 0.1% in April.
The strongest support came from a recovery in clothing and footwear sales, with volumes rising by 3.7% y/y after contracting by 1.0% previously. Growth in the "other retailers" category also accelerated from 4.8% to 6.7%, underscoring ongoing resilience in e-commerce activity. Pharmaceutical sales increased to 2.1% from 0.6%, consistent with seasonal winter demand, while general dealer volumes remained stable at 1.0%. Demand for household furniture and appliances also remained robust, with volumes growing by 8.1%, only slightly lower than the 8.6% recorded in April, suggesting that demand for durable goods remained resilient despite the fuel price shock.
Outlook
Consumers entered 2026 on a firmer footing, supported by improving purchasing power, healthier balance sheets, and lower borrowing and debt-servicing costs. These tailwinds helped sustain retail activity through the first part of the year, as evidenced by the relative strength in retail sales. However, consumer confidence deteriorated in 2Q26, reflecting heightened uncertainty and the impact of higher fuel prices on household finances, while support from wealth effects has begun to moderate.
A less supportive external environment and softer confidence are likely to encourage more cautious spending behaviour in the months ahead. Nevertheless, household consumption should remain the primary driver of economic growth in 2026, although its contribution is likely to be more modest than previously anticipated.
