Retail trade in South Africa is projected to improve moderately in 2026, aided by softer inflation and a more supportive interest rate outlook, after growth lost momentum over the festive period.

Figures released by Statistics South Africa (StatsSA) on 18 February 2026 show retail sales increased by 2.6% year-on-year in December 2025, down from a revised 3.6% in November. Although sales remained in positive territory, December marked the weakest annual expansion since August, underscoring ongoing strain on consumers.

Performance varied across categories. Growth in pharmaceuticals, medical goods and toiletries slowed sharply to 1.4% from 9.8% in November. Textiles, clothing and footwear rose by just 0.1%, while food, beverages and tobacco sales fell 5.6%, reversing the prior month’s slight gain. In contrast, household furniture and appliances strengthened, with sales climbing 11.5%.

StatsSA’s deputy director for distributive trade statistics, Raquel Floris, said six of the seven retail groups posted stronger quarterly outcomes, with general dealers — which make up over 40% of the retail basket — driving much of the growth.

For 2025 as a whole, retail trade sales rose 3.7% compared with 2024. Six of the seven categories recorded annual gains, led by general dealers and clothing retailers, while food and beverage retailers contracted by 1.5%.

Economists say the outlook has improved. Investec economist Lara Hodes noted that lower inflation and interest rates have boosted sentiment, with further rate cuts anticipated. She expects household consumption expenditure to rise by 2.1% year-on-year in 2026.

However, seasonally adjusted data showed a 0.4% month-on-month decline in December, following a 0.6% increase in November. Fourth-quarter sales grew 0.8% compared with the third quarter, with general dealers again the main contributors.

FNB senior economist Siphamandla Mkhwanazi said healthier household finances, improved purchasing power and multi-year wage agreements should support spending into 2026.

Standard Bank economist Shireen Darmalingam cautioned that December volumes fell short of expectations. While consumer financial metrics have improved, she said benefits are unevenly distributed. She added that last year’s boost from government wage growth and falling inflation is likely to fade, though equity market gains and the full effect of rate cuts could provide support — largely for higher-income households.

Standard Bank expects additional rate reductions at the March, July and November Monetary Policy Committee meetings, which could further underpin retail activity this year

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