By: Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, Koketso Mano
Calm before the storm for consumers?
Last week's weekly report reflected a downward revision to our macroeconomic expectations, following negative shifts in the external environment that have altered the previously anticipated domestic demand path. Nevertheless, we still expect consumer activity to remain the key driver of growth in the near term.
The 4Q25 South African Reserve Bank Quarterly Bulletin suggests that consumer-entered 2026 on a firmer footing, with household spending regaining momentum afte-a subdued 2024. However, with wage growth yet to show a discernible and sustaine-upward trend, the recent improvement in spending momentum likely reflected factor-outside of the labour market, notably wealth effects and early signs of household re-leveraging, rather than income driven.
That said, the world is a different place today compared to just two months ago. High-frequency data on consumers remains limited, making real-time assessments challenging. What is available, however, points to pockets of resilience, at least for now. Whether this persists or proves to be merely the calm before the storm is the question.
In the housing market, indicators continue to point to relative strength, with property values still outpacing inflation (5.7% in March, slightly lower than 5.8% in February). While house prices typically react to shocks with a lag, internal mortgage applications data reinforces the view of still-resilient demand conditions. In March, application volumes were 11.4% y/y higher and 27.8% higher than in March 2024. First-time buyer (FTB) activity, arguably the segment of the market that is most sensitive to financial conditions, also rose by 8.4% and 25.0%, respectively. Overall, this points to resilient housing demand fundamentals, with growth in household wealth, at least via physical assets, still intact.
The new car market also continues to show strength. Latest NAAMSA data for March indicates that new passenger vehicle sales grew by 18.2% y/y, accelerating from 11.1% in February and 8.4% in January. Dealer sales, more closely linked to household demand, led the gains in March. While underlying trends in the NAAMSA data can at times be distorted by industry behaviour such as pre-reporting, household credit data helps confirm a firmer trend. Instalment sale credit, largely reflecting vehicle finance, grew by 9.0% in February, up from a recent trough of 6.6% in September 2025, supporting the view that big-ticket spending by households remains resilient for now.
Looking ahead, a less supportive external environment should eventually weigh on domestic demand. Higher operating costs, particularly via the oil price channel, alongside elevated uncertainty, could compress margins and dampen investment via weaker sentiment. In turn, this may negatively affect employment and earnings prospects, feeding back into household spending. Data in the coming weeks will be critical in determining whether we are witnessing remarkable consumer resilience, or relative calm before the storm.
Week in review
Mining production (not seasonally adjusted) expanded by 9.7% y/y in February, up from 5.0% in January. Seasonally-adjusted mining output increased by 2.3% m/m, following a 3.7% increase in January. The largest contribution to total mining output growth in February came from Platinum Group Metals (PGMs), with output increasing strongly by 52.3% y/y. While this partly reflects statistical base effects, PGM miners also likely ramped up production, supported by prevailing commodity prices prior to the escalation in Middle East tensions. Overall, mining output declined by 1.7% in the three months ending in February compared to the previous three months. However, the sector should still underpin 1Q26 GDP growth. March's output would have to decline sharply for the sector to drag on GDP growth during the first quarter of 2026.
Week ahead
On Wednesday, data on consumer inflation for March will be available. Consumer inflation was recorded at 3.0% y/y in February, down from 3.5% in January. Monthly pressure was 0.4%, mainly due to services inflation, while food and fuel deflation mitigated the pressure. Core inflation was 0.7% m/m, and 3.0% y/y. Services inflation recorded 1.1% m/m, and 3.8% y/y, led by medical insurance. Food and non-alcoholic beverages (NAB) inflation slowed to 3.7% y/y. We see headline inflation ticking up slightly in March, to around 3.1% y/y, with monthly pressure of 0.5%.
Also on Wednesday, retail sales data for February will be available. Retail sales accelerated in January, coming in at 4.2% y/y, up from 2.5% in December. Monthly sales volumes grew by 0.9%, reversing the 0.5% contraction in the previous month. The largest positive contributors were sales in textiles, clothing, footwear and leather goods as well as in the “other” category. Overall, volumes increased by 1.3% in the three months ending in January compared to the previous three months, pointing to a solid start to 2026.
