By Nkateko Baloyi & Siphamandla Mkhwanazi
Retail sales growth eased slightly to 3.3% year-on-year (y/y) in August, from 3.4% in July, but came in above market expectations of a 3.0% increase. On a month-on-month (m/m) seasonally-adjusted basis, sales volumes declined by 0.3%, following 2.4% increase in July (revised from 2.5%), suggesting some loss of momentum after July's strong gain. The release suggests that consumer spending is holding up, consistent with the recovery in the FNB/BER Consumer Confidence Index (CCI) to -13 in 3Q26 from -19 in 2Q26, although sentiment remains in negative territory. The monthly decline likely reflects fading fuel price relief in August as diesel rose by R1.38/litre and petrol was cut by only 52c/litre, and food and non-alcoholic beverages inflation edged up to 1.1% y/y.
Where are consumers increasing spending
Six of the seven categories recorded positive annual sales growth in August, although the drivers of growth shifted. Clothing and footwear was the largest contributor, with sales accelerating to 6.5% y/y from 2.9% in July adding 1.0-percentage points (ppts) to the total. It was followed by all other retailers, which includes online sales (8.1% y/y, 0.9ppts), and general dealers (2.0% y/y, 0.9ppts), although growth at general dealers slowed from 3.3% in July. Food and beverage retailers also strengthened, with sales rising by 5.8% y/y (0.5ppts) from 5.0% in July. Growth in household furniture slowed to 3.0% y/y from 6.3% in July, while hardware material sales fell by 3.6% y/y, following a 1.1% decline in July, subtracting 0.3ppts from the total.
Outlook
Retailer confidence in the BER Retail Survey rose to 40% in 3Q26 from 31%, back in line with its long-term average. However, consumers remain reluctant to make discretionary purchases, and their appetite for durable goods is weakening. The confidence among high-income households, also remains low, having recovered only about half of the ground lost in the second quarter, while low-income households' confidence rebounded to its highest level since 3Q24.
The near-term environment has also become more challenging. The fuel-price shock has intensified again. Diesel prices are more than R13/litre higher than at the start of the year, and Brent crude oil remains above USD100/barrel, raising transport and distribution costs across the economy. With inflation risks skewed to the upside, the South African Reserve Bank (SARB) raised the repo rate by 25-basis points (bps) to 7.25% in September, adding to debt-servicing costs heading into the festive season. Against this backdrop, retail sales growth is likely to remain subdued for the rest of 2026, with households prioritising essentials and value-for-money retailers over big-ticket purchases, despite some support from the festive season. Household consumption should remain the primary driver of economic growth in 2026, albeit at a more modest pace.
