Stretched house­holds bat­tle as the econ­omy shrinks

Mail & Guardian - - Business - Lyn­ley Donnelly

The re­lease of the South African Re­serve Bank’s quar­terly bul­letin this week served as an­other re­minder of the strain house­holds find them­selves un­der as the coun­try bat­tles a shrink­ing econ­omy.

House­hold real fi­nal con­sump­tion ex­pen­di­ture shrank by 1.3% in the sec­ond quar­ter of 2018, ac­cord­ing to the Re­serve Bank, the first de­crease in more than two years.

Spend­ing on durable, semi-durable and non­durable goods de­clined.

This was driven by fall­ing house­hold dis­pos­able in­comes, “largely due to tax in­creases and fuel price hikes in the sec­ond quar­ter of 2018”, the Re­serve Bank said.

As house­holds’ dis­pos­able in­comes shrink, debt has also ticked up, ac­cord­ing to the Re­serve Bank.

To­tal house­hold debt picked up slightly in the sec­ond quar­ter of 2018, as mort­gage ad­vances, in­stal­ment sale credit and the use of credit cards in­creased over the pe­riod.

Ac­cord­ing to the Re­serve Bank, the ra­tio of house­hold debt to dis­pos­able in­come edged higher, from 70.9% in the first quar­ter of 2018 to 71.3% in the sec­ond quar­ter. But the cost of ser­vic­ing that debt re­mained un­changed at 9.0% over the pe­riod, the bank noted.

House­hold spend­ing was also sup­pressed “by di­min­ish­ing wealth ef­fects” in the first eight months of the year as the per­for­mance of the stock ex­change trended lower, ac­cord­ing to the Re­serve Bank. This was a re­sult of height­ened volatil­ity driven by in­creased risk aver­sion to­wards emerg­ing economies, cou­pled with weak do­mes­tic eco­nomic ac­tiv­ity and pol­icy un­cer­tainty, as well as un­cer­tainty about land ex­pro­pri­a­tion with­out com­pen­sa­tion.

In­vest­ment into South African bonds and eq­ui­ties by for­eign­ers took a sharp hit in the sec­ond quar­ter of the year.

In­ward port­fo­lio in­vest­ment shrank sig­nif­i­cantly, from R89.4bil­lion in the first quar­ter of 2018 to R16.6-bil­lion in the sec­ond quar­ter, ac­cord­ing to the Re­serve Bank, as non­res­i­dents’ ac­qui­si­tion of both do­mes­tic debt and eq­uity se­cu­ri­ties de­clined.

Pur­chases of do­mes­tic eq­ui­ties de­creased from R42.5-bil­lion in the first quar­ter of 2018 to R12.8-bil­lion in the sec­ond quar­ter, and debt se­cu­ri­ties de­creased even more, from R46.9-bil­lion to only R3.8-bil­lion, the Re­serve Bank said.

Al­though South Africa’s po­lit­i­cal and eco­nomic dy­nam­ics con­trib­uted to port­fo­lio out­flows, these were largely driven by emerg­ing mar­ket risk aver­sion, said Ned­bank econ­o­mist Jo­hannes Khosa.

“We also saw a de­cline in em­ploy­ment cre­ation, so the unem­ploy­ment rate re­mains high,” said Khosa. “That is also break­ing the per­sonal fi­nances of the coun­try.”

The re­lease on Wed­nes­day of the quar­terly em­ploy­ment sta­tis­tics (QES) sur­vey by Sta­tis­tics South Africa re­in­force these con­cerns. The QES mea­sures those jobs in the pri­vate nona­gri­cul­tural, for­mal sec­tor, in­clud­ing those in fac­to­ries, firms, of­fices and stores, as well as na­tional, pro­vin­cial and lo­cal govern­ment en­ti­ties.

Ac­cord­ing to Stat­sSA, the for­mal sec­tor shed 69 000 jobs in the sec­ond quar­ter of the year, a de­cline of 0.7% from the pre­vi­ous one.

This was largely a re­sult of de­creases in the com­mu­nity ser­vices sec­tor, which lost 67 000 jobs, man­u­fac­tur­ing, which shed 13000 jobs, min­ing and quar­ry­ing, which lost 2 000 jobs, and trans­port, which also shed 2 000 jobs.

Al­though em­ploy­ment in the for­mal sec­tor has grown when mea­sured on a year-on-year ba­sis, it was at a rate of 0.1%, or 13 000 new jobs.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.