Salaries in May 2026 have slipped to their weakest level in two years, according to the latest PayInc data, pointing to renewed pressure on household incomes in South Africa. But there could be some relief on the horizon for the local economy in the coming months.

The Net Salary Index tracks the monthly average nominal net salaries of approximately 2.1 million salary earners.

The Index for May, released on Tuesday, reiterated that salary growth has failed to keep pace with rising inflation, resulting in a continued decline in real earnings.

Salaries in May

The PayInc Nominal Net Salary Index increased marginally to R21 510 in May 2026, up 0.2% from April and 0.9% higher than a year ago. However, this is a two-year low.

For the first five months of 2026, nominal net salaries increased by just 1.7%, while real salaries declined by 1.7%, signalling a challenging year for people after two years of relatively strong earnings growth.

Nominal net salaries are the actual take-home pay people receive, measured in today’s money, without adjusting for inflation or changes in the cost of living.

“While nominal salaries have edged higher, the reality is that salary earners are losing purchasing power,” says Elize Kruger, independent economist. “This is placing increasing strain on household budgets and is likely to weigh on consumer spending and broader economic growth during the remainder of the year.”

Household spending showing signs of strain

Kruger says spending growth was mainly for essential categories such as transport, housing, electricity and utilities. Expenditure on restaurants and hotels, food and non-alcoholic beverages, and other categories weakened, reflecting growing pressure on household finances.

The deterioration comes amid a sharp increase in fuel prices and a rise in interest rates following the outbreak of the Middle East conflict.

These developments have pushed consumer inflation from a recent low of 3.0% in February to 4.5% in May, placing additional pressure on both households and businesses.

Confidence levels

The FNB/BER Consumer Confidence Index (CCI) fell from -7 in the first quarter of 2026 to -19 in the second quarter, representing a significant decline in consumers’ willingness to spend.

Similarly, the RMB/BER Business Confidence Index (BCI) dropped by eight points to 39 in the second quarter, reversing gains recorded over the previous two quarters.

“The combination of higher living costs, weaker confidence and ongoing uncertainty is creating a difficult environment for both consumers and businesses,” says Kruger.

“Companies are likely to remain cautious in their investment and hiring decisions until there is greater clarity on the economic outlook.”

Lower inflation could signal relief

Shergeran Naidoo, Head of Stakeholder Engagement at PayInc, notes that although nominal salaries recorded modest growth in May, the impact of inflation resulted in the PayInc Net Salary Index declining by 0.3% month-on-month in real terms and by 2.8% year-on-year.

“At R20 262, the average real net salary reached its lowest level in approximately two years,” says Naidoo.

The continued decline in real earnings is expected to limit consumer spending and reduce the potential for stronger economic growth.

Real GDP growth is currently forecast at 1.3% for 2026, marginally higher than last year but still insufficient to drive meaningful job creation or significant wage growth.

Despite current challenges, there are early signs that inflationary pressures could begin to ease in the coming months.

Middle East peace agreement

Kruger says that following a tentative Middle East peace agreement, international oil prices have retreated, with Brent crude declining to around $77 per barrel.

Current fuel price over-recoveries suggest petrol and diesel prices could decrease by approximately R2.50 per litre and R3.75 per litre, respectively, from July.

“This anticipated relief, which could extend into August should oil prices remain subdued, may help stabilise consumer confidence and support a more favourable inflation outlook,” says Kruger.

“Reflecting these developments, Carpe Diem Research has revised its average inflation forecasts lower to 4.1% for 2026 and 3.8% for 2027, from previous forecasts of 4.4% and 4.1% respectively.

“While the recent easing in oil prices is encouraging, uncertainty surrounding the broader economic impact of the Middle East conflict remains.”