South Africa — South African consumer confidence has experienced a severe downturn, dropping to its lowest point in over a year as geopolitical tensions and mounting economic pressures squeeze household budgets. According to the latest First National Bank (FNB) and Bureau for Economic Research (BER) Consumer Confidence Index, sentiment plummeted to -19 points in the second quarter of 2026. This marks a significant decline from the -7 points recorded in the first quarter, falling sharply from a recent 15-month high.
Geopolitical Fallout and Shifting Spending Habits
The primary catalyst for this steep decline is the economic ripple effect of the Gulf conflict, specifically the war involving Iran. The geopolitical instability has pushed fuel prices sharply higher, disrupted international travel, and weighed heavily on stock markets, including the local bourse.
As a result, optimism regarding the broader economic outlook has deteriorated. Consumers are increasingly hesitant to spend, with significantly fewer households believing that now is an appropriate time to purchase big-ticket items such as cars, furniture, and household appliances.
Income Brackets Feel the Pinch Differently
Mamello Matikinca-Ngwenya, Chief Economist at FNB, notes that the drop in confidence highlights a complete reversal in how citizens view their personal finances, shifting from previous optimism to distinct worry over the next 12 months. However, the economic pain is distributed differently across income groups:
Lower-Income Households: Highly vulnerable to food inflation, rising petrol costs, and an economy that is not generating adequate employment. These groups are more likely to rely on public transportation but still feel the intense macroeconomic strain of stagnant wages and basic living costs.
Higher-Income Earners: While previously more insulated, affluent consumers are now feeling the pinch of higher petrol prices due to their heavier reliance on private vehicles. Furthermore, underperformance on the Johannesburg Stock Exchange (JSE) is directly weighing on their household balance sheets and investment portfolios.
Monetary Policy, Interest Rates, and Inflation Risks
The shifting confidence landscape aligns with recent macroeconomic data. First-quarter 2026 GDP figures indicated that consumer activity was already beginning to moderate, a trend that Matikinca-Ngwenya expects to continue deeply into the second quarter.
Compounding the pressure is the trajectory of monetary policy. The Reserve Bank’s Monetary Policy Committee (MPC) recently increased interest rates by 25 basis points, and market pricing currently embeds expectations for at least one more rate hike this year.
While a recent pause in the US-Iran conflict temporarily drove oil prices down, Matikinca-Ngwenya warns that markets may have overreacted to this positive news. The speed at which global oil supplies will rebuild remains uncertain, keeping energy-related inflation risks alive.
Looking ahead, the central bank is closely monitoring “second-round effects” of inflation. FNB forecasts that inflation will peak next year. Currently sitting above the central bank’s 3% target mark, elevated inflation continues to erode real disposable income. Additionally, while food inflation has been relatively moderate this year, weather-related patterns pose a distinct upside risk to food prices heading into 2027.
The Road to Economic Recovery
For a near-term recovery in sentiment to take root, two critical factors must align: inflation must stabilize, and the economy must produce meaningful job gains.
“If we continue with a very weak labor market on the back of elevated inflation and potentially a Reserve Bank that increases interest rates again this year, that is going to weigh heavily on sentiment,” Matikinca-Ngwenya explained.
Ultimately, the economic outlook remains cautious. FNB projects that consumer activity will remain weaker throughout 2026 compared to the previous year, with a tangible improvement in sentiment and spending only expected to materialize in the second half of 2027.
