By Nkateko Baloyi
Retail sales growth slowed to 1.6% year-on-year (y/y) in June, down from 2.2% in May (revised from 2.3%) and well below market expectations of a 2.5% y/y expansion. On a month-on-month (m/m) seasonally-adjusted basis, sales volumes fell 0.6%, a reversal from a broadly flat May. The release suggests fading consumer momentum, consistent with the decline in the Consumer Confidence Index, which fell to -19 from -7 in the previous quarter. Nevertheless, retail sales grew by 0.6% quarter-on-quarter (q/q), indicating a positive contribution to 2Q26 GDP growth, supported by gains earlier in the quarter.
Where are consumers cutting spending?
Five of the seven retail categories recorded annual growth. Clothing and footwear sales recorded the sharpest reversal, with sales contracting by 2.2% y/y following a 3.9% expansion in May. Hardware material deepened it's decline, falling 4.0% y/y after a 0.5% drop in May. Both categories point to consumers pulling back on discretionary and home improvement-related spending, consistent with the squeeze from higher fuel costs and the sharp pullback in consumer confidence.
The strongest support again came from household furniture, with volumes rising to 8.5% y/y from 7.6% in May. Growth in the "other retailers" category also accelerated, from 6.4% to 7.5%, reflecting continued gains in e-commerce activity.
Outlook
Consumers enter the second half of 2026 under renewed strain. As mentioned above, the Consumer Confidence Index plunged to -19 in the 2Q26, down sharply from -7 in the 1Q26 and the weakest reading since the 1Q25, as the spike in global oil prices tied to the Middle East conflict fed through to higher fuel costs alongside an interest rate hike. 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.
