South African households entered the second quarter of 2026 in a stronger financial position than many analysts had anticipated, even as the Iran conflict lifted oil and domestic fuel prices, nudged inflation higher and prompted the SARB to raise interest rates.
Consumer spending stays strong despite higher fuel costs
Real gross domestic product slipped 0.2% quarter-on-quarter in Q2, yet real household consumption rose 0.4%. Year-over-year, consumer spending grew 2.9%, up from a 2.5% gain in the first quarter, showing resilience amid rising fuel costs.
Nominal disposable-income growth accelerated sharply, climbing from 4.6% in Q1 to 7.8% in Q2. John Loos notes that investment income likely drove much of this increase, as wage-bill growth slowed and employment remained weak. Real disposable-income growth rose from 1.3% to 2.97% year-on-year, keeping household purchasing power ahead of inflation.
Because the rise in income outpaced the increase in debt, households were able to sustain spending levels. The surge in investment returns offset the modest slowdown in wages, allowing families to keep up with higher prices without severely cutting back on non-essential items.
Despite stronger spending, the net household savings rate slipped further into the red, moving from –1.3% of disposable income in Q1 to –1.6% in Q2. The decline indicates that households are drawing down limited buffers even as they maintain consumption.
Vulnerable households face mounting cost pressures
Higher fuel costs have added to inflation, prompting interest-rate pressure and higher debt-service burdens. Weaker household finances now pressure mortgage repayments and housing demand.
Families with limited buffers face unexpected increases in bond repayments, electricity and municipal charges, fuel and transport costs, food prices, insurance and maintenance expenses, and other outlays. Loos expects a moderate increase in mortgage arrears.
Debt ratios improve
The household debt-to-disposable-income ratio fell to 61.3%, its lowest level since 2019, while the debt-service ratio edged down from 9.5% to 9.4% despite a 25-basis-point rate hike in May. These improvements suggest that higher income growth outpaced debt accumulation.
Loos expects another significant fuel-price shock. His 1 October assessment points to petrol prices potentially increasing by more than R3 per litre during October, with diesel increases of a broadly similar magnitude. Higher transport and logistics costs are likely to feed into food prices, putting additional strain on household budgets and potentially pushing headline CPI back above 5%.
