We’re still standing — SA’s GDP contracted, but this does not a recession make

Of course, the spectre of geopolitical escalation from the war in the Middle East (which peaked between April and June 2026) loomed large over the period and triggered global oil price shocks and heightened cost pressures, and elevated business uncertainty. This external instability weighed heavily on business confidence and private sector fixed investment.

But because this was not consecutive quarterly decline, we cannot technically call it a recession. Or be surprised that the contraction was concentrated within specific cyclical production sectors (trade, manufacturing and mining) rather than representing a broad-based structural collapse across all sectors.

The above was the reasoning of Reza Hendrickse, portfolio manager at PPS Investments. He also explained that “from an expenditure perspective, there were some encouraging signs beneath the headline contraction”.

“Household consumption expenditure increased by 0.4%, suggesting consumers benefitted from lower inflation and the more favourable interest-rate environment than a year ago…”

It’s all about resilience

Despite major drags from supply-side sectors, structural resilience in service industries and consumer demand prevented a deeper contraction.

Consumer spending grew steadily during Q2, driven by essential categories such as food and non-alcoholic beverages. Consumers benefited from lower inflation and a more favourable interest rate climate compared with the prior year.

This was also helped by interest rate cuts since late 2024, so we’ve seen the ratio of household income to debt costs rise 5.9% year on year. And we’re winning on more than just the rugby field because South Africa’s household debt-to-GDP ratio remains among the lowest among global peers, reducing our financial shock risks.

“The expenditure on GDP data points to some resilience on the part of consumers,” says Christelle Grobler, macroeconomic analyst at Standard Bank.  

“Household consumption expenditure increased by 0.4 on a quarterly basis um with food and non-alcoholic beverage uh expenditure remaining quite strong. Exports were higher and we also saw a rise in inventories, contributing positively to growth.”

Another positive outcome from the GDP results that should be key growth drivers for the back half of 2026 is the greatly anticipated record summer grain crops, motor vehicle sector stabilisation (VW is gearing up to build an all-new car in Kariega), mineral export demand, vibrant retail trade, and new private/public investments in energy and logistics infrastructure.

READ MORE

Transport Minister Barbara Creecy has made the hard yards in rail reform

July 9, 2026

New benchmarks, who dis?

Statistics South Africa and the SA Reserve Bank are undergoing a comprehensive benchmarking and rebasing of national accounts data, which will provide updated economic growth metrics later in the year.

We’re also in the post-austerity economy – at least according to Enoch Godongwana – where continued interest rate cuts will lower the cost of credit and capital, freeing up discretionary disposable income for households and lowering investment hurdles for businesses.

Over the past decade, Mzansi has stared down load shedding, State Capture, a global pandemic, two Trump presidencies and now a Middle East conflict escalation … and we’re still here.

There is always hope, and it always seems impossible until it is done. We’re not done yet. DM