South African Consumer Spending Growth Slows to Three-Year Low
South African consumer spending increased at the slowest pace in three years in the third quarter, undermining growth in Africa’s largest economy.
Household expenditure rose an annualized 2.6 percent after gaining 3.1 percent in the previous three months, the Reserve Bank said in its Quarterly Bulletin released in Pretoria today. Growth in gross domestic spending eased to 3 percent from 4.9 percent.
Consumers, who account for almost two-thirds of demand in South Africa, have come under pressure this year as the economy shed jobs while food and fuel prices climbed. The central bank cut the benchmark interest rate in July and has left it unchanged since then at 5 percent, the lowest level in more than 30 years, to help support spending.
The slowdown in gross expenditure last quarter was mainly due to a drop in inventories following strikes in the mining industry, the central bank said. That offset higher spending by the government, which rose 8.4 percent compared with 3.7 percent in the second quarter. Investment increased 7.2 percent, up from 7 percent, the bank said.
Even as households spent more, their debt levels remained unchanged at 76 percent of disposable income in the third quarter as lower interest rates drove down debt-service costs, the bank said.
Rising wage settlements following strikes in the mining, transport and farming industries may add to pressure on inflation. Unit labor costs rose 6.1 percent in the second quarter compared with 5.8 percent in the previous three months, the bank said.
Still, the short-term impact “could be fairly muted as it would take some time for most of the affected workers to recoup the wages they had foregone,” the bank said.
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