We have updated our Consumer Wallet model, which measures growth in consumer spending power and serves as a proxy for the likely level of retail sales growth this year.
We cut our job growth forecast for 2026 from 1.5% y-y to 0.3% y-y, which could result in just 50 000 new jobs. This is due to weak momentum in the latest Labour Force Survey (LFS). However, the Quarterly Employment Survey (QES) shows decent wage growth, and we maintain our forecast of an average wage increase of 5.5% y-y.
The Middle East crisis has resulted in rising interest rates and higher fuel costs. We expect consumer debt repayments to rise by R19bn, while their transport costs could increase by R34bn.
Based on the latest estimates, consumer spending power in 2026 may be much lower than our initial forecast, with a 4.4% y-y increase in funds available for retail and discretionary spending (previously 9.4% y-y).
We demonstrate the effects of various oil prices on Consumer Wallet growth. If oil prices average USD100/bbl for the rest of 2026, transport costs could increase by 12.9% y-y, and Consumer Wallet growth could slow to 4.2% y-y.
We believe there may be a higher risk of markdowns for apparel retailers, given the increase in promotional activity.