The town experiences a very mild Mediterranean climate, more moderate than most other Western Cape locales, with abundant rainfall, mostly in the winter months, although strong summer south-easterly winds can sometimes bring squalls, typically called the "Black South-Easter" for its gusting winds and showers. 

The town's economy is based on servicing the surrounding agricultural industry, with the Elgin Valley being intensively used for viticulture and the cultivation of apples, pears, plums and other deciduous fruit.  One of the biggest factories in Grabouw is Appletiser which provides the popular Appletiser soft drinks.  

Tourism is also of importance to the economy.  The N2 highway through the valley is extremely busy during the holiday season.