Retail sales growth slows in February and will remain muted this year

Annual growth in retail sales slowed to 1.6% in February from an upwardly revised 4.4% in January, with further easing on the cards in the months ahead as increased fuel costs drive other prices higher for consumers.

Five of the seven retail groups were stronger in February, with the miscellaneous category — which includes online stores and retailers specialising in jewellery, stationery and sports goods — being the most significant positive contributor, Stats South Africa said on Wednesday.

The category expanded by 9.4% year on year, adding one percentage point to overall retail sales growth.

The textiles and clothing category was the second largest positive contributor, rising by 3.9% and contributing 0.6 percentage points

“Not all was positive in February, however. General dealers and retailers specialising in food and beverages recorded a decline in sales. Food and beverages registered the largest decrease, shrinking by 5% year on year,” said Raquel Floris, deputy director for distributive trade statistics at Stats SA.

Consumers entered 2026 on a firmer footing, supported by improving purchasing power, stronger balance sheets and lower borrowing and debt‑service costs. This backdrop contributed to improved consumer sentiment, particularly among higher‑income households

—  Siphamandla Mkhwanazi, FNB senior economist

Month to month, seasonally adjusted retail trade sales contracted by 1% in February, having risen 0.9% in January following a 0.5% dip in December.

Sales were up 0.5% in the three months ended February compared with the previous three months, and by 2.8% versus the same period last year.

Retail sales are a key driver of South Africa’s economic growth, but spending could retreat this year as prices rise in response to the higher cost of fuel due to the US-Israel war against Iran.

“Consumers entered 2026 on a firmer footing, supported by improving purchasing power, stronger balance sheets and lower borrowing and debt‑service costs. This backdrop contributed to improved consumer sentiment, particularly among higher‑income households,” said Siphamandla Mkhwanazi, a senior economist at FNB.

“Looking ahead, however, a less supportive external environment is likely to increasingly weigh on domestic demand. Rising operating costs, via the oil‑price channel, alongside heightened uncertainty, could compress margins and dampen investment demand via weaker confidence.”

“In turn, this could feed through to softer employment and earnings outcomes, constraining household spending. Nevertheless, consumers are still expected to drive GDP growth in 2026, albeit at a slower pace than initially anticipated.”