By Thanda Sithole
In a nutshell
Real Gross Domestic Product (GDP) expanded by 0.5% quarter-on-quarter (q/q) (seasonally adjusted) in 1Q26, a modest acceleration from 0.4% q/q in 4Q25. The outturn was stronger than our forecast of 0.2% and the Reuters consensus forecast of 0.3%. This marked the sixth successive quarter of GDP expansion. On an annual basis, growth accelerated to 1.9% year-on-year (y/y) from 0.8% y/y in 4Q25, largely reflecting a rebound in agricultural growth to 5.3% from -12.8%. Meanwhile, the mining and quarrying and finance, real estate and business services sectors also experienced growth acceleration.
Outlook
Today's outcome poses a marginal upside risk to our below-consensus growth forecast of 1.0% for 2026. However, the risk remains that the 2Q26 growth outcome may be materially weaker than today's result, given the deterioration in operating conditions relative to 1Q26. The softer consumption spending momentum in 1Q26 is particularly concerning, especially as it pre-dates the significant domestic fuel price increases and the latest interest rate hike. The deterioration in operating conditions is reflected in the latest BER Business Confidence survey, which showed business confidence declining to 39 points from 47 in 1Q26.
Broader implications
While the stronger-than-expected 1Q26 outcome points to greater economic resilience than previously anticipated, the composition of growth remains uneven. The acceleration was driven largely by financial services, agriculture and a positive contribution from net exports, while household consumption and private fixed investment remained relatively subdued. This suggests that the recovery remains narrow and has yet to translate into broad-based domestic demand growth. As such, the stronger first-quarter performance should not be interpreted as evidence that South Africa has broken out of its low-growth environment, particularly given the softer business confidence backdrop and the deterioration in operating conditions entering 2Q26.
Supply-side (production) view
Quarterly GDP growth was largely driven by the finance, real estate and business services sector, which expanded by 0.9% q/q and contributed 0.2-percentage points (ppts) to overall growth, following growth of 1.4% q/q in 4Q25. Growth in this sector was underpinned by increased economic activity in financial intermediation and auxiliary activities. The growth performance of the remaining sectors is shown in Figure 3 below.
Demand-side view
Growth in household consumption weakened, coming in at 0.1% q/q, down from 1.2% in 4Q25, reflecting slower growth in durable goods (1.3% from 3.0%), semi-durable goods (0.1% from 2.0%) and non-durable goods (0.4% from 0.7%). Meanwhile, consumption spending on services declined by 0.3% following growth of 0.8% in 4Q25. Growth in consumption spending is likely to remain subdued in the near term amid rising prices that have eroded household purchasing power.
Following two consecutive quarters of growth, total fixed investment declined by 1.1% q/q in 1Q26, reflecting a 4.9% quarterly decline in fixed investment by private business enterprises. Meanwhile, investment by public corporations and general government increased by 9.3% and 7.5%, respectively.
Inventories reflected drawdowns amounting to R22.4 billion, worse than the R6.2 billion drawdown recorded in 4Q25, reflecting sizeable declines in manufacturing and trade, catering and accommodation.
Export volumes of goods and services increased by 0.5% q/q, rebounding from -0.6% in 4Q25, supported by increased exports of mineral products, vegetable products, as well as prepared foodstuffs, beverages and tobacco.
Import volumes of goods and services contracted by 2.6%, following growth of 0.5% q/q in the prior quarter. As a result, real net exports recorded a narrower deficit of R51.2 billion compared with R92.1 billion in 4Q25, supporting quarterly GDP growth by 0.9ppts (effectively the largest contribution to GDP growth from the demand side).
