The SA Reserve Bank released its Quarterly Bulletin today, showing that personal finances deteriorated in Q1 2018.
According to Nedbank’s Dennis Dykes and Johannes Khosa:
- There was almost no growth in real disposable income over the quarter, while household debt increased.
- The ratio of household debt to disposable income rose to 71,7% from 71,2%, and the debt service ratio edged up to 9,2% from 9,1%.
Household incomes are likely to come under some pressure from the poor job market, increased VAT as well as rising food, fuel and other prices in the short term.
“Household finances weakened in the first quarter of 2018. There was almost no growth in real household disposable income, which came in at only 0,2% over the quarter, its weakest since the first quarter of 2016 from 2,7% in the last quarter of 2017, the economists said. “During the same period household spending increased, albeit as a slower rate as consumer confidence rose to historic highs following the constructive changes in the country’s political leadership in late 2017 and pre-emptive spending ahead of the increase in VAT rates. Higher growth in credit demand was recorded over the period, pushing the household debt to disposable income ratio to up to 71,7% from 71,2%, and the debt-service cost to edge up to 9,2% from 9,1%,”.
Dykes and Khosa added that household incomes are likely to come under some pressure from the poor job market, increased VAT as well as rising food, fuel and other prices in the short term. “However, the outlook for consumer spending remains relatively favourable, supported by earlier interest rate cuts and generally improved confidence levels, given the constructive changes in the country’s political leadership and the decisive actions taken to root out corruption and restore fiscal discipline. We forecast consumer spending to increase by 2,3% in 2018 and 1,8% in 2019.”