South Africa’s economic activity remained under pressure in October 2026, as rising fuel prices continued to weigh on businesses and households. However, easing international oil prices could bring some much-needed relief towards year-end, according to the latest PayInc Economic Index.
“The PayInc Economic Index declined by 0.7% in October, following a 0.4% dip in September,” says Shergeran Naidoo, head of stakeholder engagement at PayInc.
At an index level of 103.1, economic activity was just 0.4% higher than a year earlier, reflecting the difficult economic conditions.
Renewed pressure on international oil prices since July has pushed domestic fuel prices significantly higher. Between September and October, the prices of 93-grade petrol and 0.05% sulphur diesel increased cumulatively by R4.46 and R5.78 per litre, contributing to economic weakness evident in October.
“The PayInc Economic Index reflects an economy that started 2026 on a relatively strong footing but has since lost momentum amid the Middle East conflict and rising fuel costs,” said Elize Kruger, Independent Economist.
Positive signals that the worst is over
The Republican Party’s notable losses in the US mid-term elections, in early November, have prompted investors to reassess the prospects for a negotiated settlement between the US and Iran. Democratic victories could give the party greater leverage to challenge military funding and constrain the current administration’s options when the new Congress takes office in January 2027.
The economic consequences of the conflict for US consumers, particularly elevated fuel prices, also appear to have influenced voter sentiment.
Oil markets have already started to factor in the possibility of a diplomatic resolution, with international Brent crude oil prices declining to approximately $91 per barrel, from nearly $117 per barrel as recently as 30 October.
“While the economic impact of the conflict has been significant, the recent decline in international oil prices offers some hope that the worst may be over. If oil prices remain at these lower levels throughout November, substantial fuel price reductions could follow in December and January 2027,” says Kruger.
Notable over-recoveries on petrol and diesel prices are already evident. Combined with the relatively strong rand exchange rate, these could bring some relief at the pumps in December. The current fuel price also includes a slate levy of R1.36 per litre, which could be reduced if over-recoveries persist.
“Lower fuel prices would provide relief to household disposable incomes ahead of the December holiday season, while also reducing operating and transport costs for businesses. This could support confidence levels and positively influence consumer and producer inflation,” said Kruger.
This could also ease pressure on real salaries and provide the South African Reserve Bank with greater comfort regarding its monetary policy stance.
However, the positive year-end scenario is not without risk. Oil markets may have moved ahead of developments on the geopolitical front, creating the possibility of a reversal in recent price declines. Nevertheless, the outcome of the US mid-term elections could have a meaningful influence on the outlook for 2027.
Mixed picture for monthly economic indicators
The S&P Global South Africa Purchasing Managers’ Index (PMI) remained at 49.0 for the second consecutive month in October. Four of the five subcomponents contributed negatively, including faster declines in output and staffing levels. Businesses attributed weaker activity to subdued customer demand, higher fuel costs and disruptions to ports and shipping.
The seasonally adjusted Absa Manufacturing PMI increased by 0.9 points to 49.6 in October, from a revised 48.7 in September. While the index improved for the second consecutive month, it remained below the neutral 50-point mark, signalling a fifth consecutive month of contraction in manufacturing activity.
The new vehicle sector continued to demonstrate resilience. According to Naamsa, total new vehicle sales increased by 10,4% year-on-year in October, while passenger car sales rose by 13,6%. Unfortunately for local manufacturers, the lion’s share of vehicles sold were lower cost imported models.
The volume of electronic transactions in October reached an all-time high, according to Naidoo. The total number of transactions cleared through PayInc rose to a record 212,1-million in October, from 197,3-million in September, representing a 12,3% increase compared to a year earlier. This surpassed the previous record of 201,5-million transactions recorded in July 2026.
The nominal value of electronic transactions also increased, rising from R1,447-trillion in September to R1,528-trillion in October.
The strong growth in the volume of transactions, despite the decline in economic activity, suggest that people are transacting more often, but for a lesser value, for example using split payments, topping-up airtime more frequently or moving shopping trips from monthly to weekly.
Cash supplied to banks, which forms part of the PayInc Economic Index, also increased notably during the month.
“Although October’s results reinforce the challenging economic conditions, the recent decline in international oil prices offers some hope that conditions could improve towards year-end, supporting confidence heading into 2027,” says Kruger.