Punch drunk

Lit­tle money for dis­cre­tionary spending

Finweek English Edition - - Portfolio Punts -

SOUTH AFRICAN CON­SUMERS are punch drunk. That’s clear from the lat­est re­tail sales fig­ures, which fell a very sub­stan­tial 5,5% year-on-year in real terms in Au­gust. The fall fol­lows a de­cline of 4,6% in July. Statis­tics SA fig­ures show re­tail sales in the three months to Au­gust were down 3,8% in real terms and down 1,7% in the first eight months of the year. In 2007 as a whole, sales grew by an av­er­age of 5,1%. Stan­lib econ­o­mist Kevin Lings says he ex­pects re­tail sales to de­cline over 2008 as a whole.

Lings says un­der cur­rent eco­nomic con­di­tions there’s no doubt the con­sumer is un­der enor­mous pres­sure, es­pe­cially in terms of monthly cash flow. Says Lings: “The ba­sic con­cern is that since con­sumers are fac­ing a range of larger than nor­mal price hikes that will im­pact more fully on non-dis­cre­tionary spending, the amount of money avail­able for dis­cre­tionary spending will be sub­stan­tially cur­tailed this year and next.”

The larger than nor­mal in­creases in­clude higher debt ser­vic­ing costs, food prices, petrol prices, elec­tric­ity tar­iffs, rentals, ed­u­ca­tion, health­care and mu­nic­i­pal as­sess­ment rates. To­gether, those com­prise around 65% of to­tal con­sumer spending.

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