South Africa’s economy loses momentum as inflation squeezes consumers
South Africa’s economy showed signs of losing momentum in the second quarter, with mining, manufacturing and electricity output weakening as higher inflation put households under pressure.
The South African economy experienced a slowdown in the second quarter of 2026, following a strong start to the year. According to Investec's chief economist, Annabel Bishop, the South African Reserve Bank's composite leading business cycle indicator declined by 1.6% in the second quarter, marking a downturn from a high level in the first quarter.
GDP grew by 0.5% in Q1, but data for Q2 is expected on September 8th. The economic slowdown impacted various sectors, with mining production dropping 5.4% year-on-year in May, manufacturing declining 4.3%, and electricity generation decreasing by 9%. Retail trade showed a 2.3% increase, but inflation remained a significant issue, reaching 5% in June.
The pressure on consumer spending due to high inflation is evident, as real household incomes dwindled. The South African Reserve Bank's leading indicator, while still higher compared to the previous year, has not experienced a substantial recovery. However, inflation signs of easing, with the rate dropping from 5% in June to 4.3% in July.
Analysts remain optimistic about South Africa's economic trajectory, citing the progress of structural reforms, private sector participation in electricity, logistics reforms, and improved fiscal discipline.
Written by urgent.news from IOL's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
