South Africa’s economic activity improved in July 2026, following a challenging performance in June and May, according to the PayInc Economic Index.
Lower fuel prices provided some relief, while record transaction volumes point to resilient economic activity.
However, underlying pressures remain, with the latest labour market figures highlighting the strained operating environment.
“At 102.7, the index recovered some of the ground lost following declines of 0,9% in June and 2% in May,” says Shergeran Naidoo, head of stakeholder engagement at PayInc. “The index remained 0,9% higher than a year earlier. While the broader environment remains difficult, the latest PayInc Economic Index shows that economic activity regained some momentum during the month.”
The improvement coincided with the first notable decline in both petrol and diesel prices in several months, following substantial increases earlier in the year. Oil markets have reacted positively to the signing of a perceived peace framework between the United States and Iran on 17 June 2026.
The relationship between fuel prices and economic activity has become increasingly evident in recent months, with higher fuel prices coinciding with weaker economic activity and July’s decline in fuel prices providing some relief.
“Fuel prices have emerged as an important driver of economic activity in recent months, given their direct impact on household budgets and business operating costs,” says independent economist Elize Kruger.
“July’s lower fuel prices provided some welcome relief and coincided with an improvement in economic activity. However, continued volatility in international oil markets means that the outlook remains uncertain.”
With the international oil price currently around US$89 per barrel, another round of domestic fuel price increases could be on the horizon for September.
“Continued geopolitical uncertainty and volatility remain a risk to business and consumer confidence, with households and businesses likely to remain cautious about spending, investment and hiring decisions,” says Kruger.
According to Statistics South Africa, the official unemployment rate increased to a four-year high of 33,6% in the second quarter of 2026, from 32,7% in the first quarter. The number of unemployed people increased by 345 000 quarter-on-quarter to 8,5-million, while the number of employed people declined by 16 000 to 16,7-million. The formal sector shed 41 000 jobs during the quarter, while employment in private households declined by 9 000. The informal and agricultural sectors collectively added 34 000 jobs.
“The labour market remains one of the clearest indicators of the pressure facing the economy,” says Kruger. “Meaningful job creation requires stronger economic growth and a business environment that gives companies the confidence to invest, expand and hire. Higher input costs, elevated interest rates and persistent uncertainty continue to make those decisions difficult.”
Pockets of resilience
Other timely economic indicators also pointed to some resilience during July.
The S&P Global South Africa Purchasing Managers’ Index edged down to 50.3 in July from 50.5 in June. While marginally lower, a reading above 50 still indicates an improvement in private sector business conditions. Business activity increased for the first time in three months, while lower fuel prices helped ease cost pressures.
New vehicle sales also remained robust. Naamsa reported total vehicle sales of 57 708 units in July, compared with 54 410 in June, representing annual growth of 11,9%. This marked the 22nd consecutive month of year-on-year growth.
The seasonally adjusted Absa Purchasing Managers’ Index declined to 46.8 in July from 47.3 in June. However, underlying indicators were somewhat more positive, with improvements in new sales orders and business activity, alongside easing supply-chain delays and moderating input costs.
Transaction volumes
Payment activity provided another positive signal in July, with both the volume and value of transactions increasing across almost all payment streams.
Averaging approximately 186-million transactions per month in Q2, the number of transactions cleared through PayInc reached an all-time high of 201,5-million in July, up from 186,8-million in June and 13,5% higher than a year earlier.
“The nominal value of electronic transactions also increased to R1,521-trillion, from R1,427-trillion in June, reflecting the growing preference for electronic payments as the preferred transaction choice,” says Naidoo.
The supply of wholesale cash to banks, which is also included in the PayInc Economic Index, increased moderately during the month.
Despite July’s improvement, persistent uncertainty and broader economic pressures continue to weigh on the outlook.
“July offered a welcome improvement, but one month does not yet signal a sustained turnaround,” says Kruger. “A more meaningful recovery will depend on greater stability, easing cost pressures and an improvement in confidence that encourages households to spend and businesses to invest and create jobs.”