The South African Reserve Bank’s latest quarterly bulletin shows that wages are rising gradually in many industries and this trend is expected to continue.
While this increase will support moderate growth in disposable income from the fourth quarter, greater economic recovery could be further hindered by the ongoing Covid-19 pandemic, Nedbank said in a research note on Wednesday (15 December).
“Household finances will remain under pressure in the short term, with the purchasing power of the disposable income eroded by rising inflation.
“Covid-19 and its mutations will probably continue to disrupt economic momentum unless a concerted effort is made to accelerate vaccinations,” the bank said. “If little progress is made, the travel, tourism, hospitality, food services, and commercial property industries will remain under acute pressure, resulting in further company closures and job losses.”
Nedbank said fragile consumer confidence and rising interest rates will probably also encourage households to build up savings and avoid adding more debt in the coming months.
South Africa has administered a total of 27,304,475 Covid-19 vaccines as of Tuesday (14 December). A total of 102,398 vaccines have been administered in the past 24 hours.
The total number of adult South Africans who have been administered to date is 17,530,115 – around 44.5% of the country’s adult population.
The Reserve Bank’s bulletin shows that household finances weakened further in the third quarter with the economic recovery interrupted by tighter lockdown restriction as the country battled with the third wave, while job losses were intensified by the social unrest in KwaZulu-Natal and parts of Gauteng.
Inflation also increased over the period, eroding real personal disposable income further, which contracted by 1.7% q-o-q, the first quarterly contraction since the second quarter of 2020.
Real disposable income was also 1.7% lower on a year-on-year basis. Consequently, households limited spending, with household consumer spending (HCE) declining by 2.4% q-o-q in the third quarter following four quarters of growth. Spending on all categories of goods contracted over the quarter, while spending on services recorded no growth.
“Household debt increased at a slower pace in the third quarter, reflecting the decline in spending and depressed consumer confidence,” Nedbank said.
“However, the debt ratios rose due to the decrease in income. The household debt to nominal disposable income increased to 67.8% from 66.7%, while the ratio of debt-service cost to nominal disposable income edged up to 7.6% from 7.5%.”