Household finances are expected to continue improving for the rest of the year as consumers withdraw from the two-pot retirement funds while headline inflation and fuel prices also continue to slow down.
The South African Reserve Bank (SARB) yesterday said real gross domestic expenditure increased by 1.0% in the second quarter of 2024 following a decrease of 0.6% in the first quarter.
In its Quarterly Bulletin, the SARB said real final consumption expenditure by households contributed the most to growth in real gross domestic product (GDP) in the second quarter of 2024, followed by general government and an accumulation in real inventory holdings.
By contrast, the SARB said net exports detracted the most from real GDP, followed by a further deduction by real gross fixed capital formation over this period.
“Real final consumption expenditure by households reverted to an increase of 1.4% in the second quarter of 2024 from a marginal decline in the first quarter. The increase was broad-based across the expenditure components, supported by an increase in the real disposable income of households,” the SARB said.
“Household spending on semi-durable goods and services reverted to an increase in the second quarter, while real outlays on durable and non-durable goods increased further.
“Household debt as a percentage of nominal disposable income edged lower from 63.0% in the first quarter of 2024 to 62.2% in the second quarter as the increase in nominal disposable income exceeded that in household debt.
“Households’ cost of servicing debt relative to disposable income decreased marginally from 9.2% to 9.1% over this period, reflecting the slower pace of increase in the stock of debt, while the prime lending rate remained unchanged.”
The Bulletin said domestic economic activity recovered in the second quarter of 2024 as real GDP expanded by 0.4% along with a stable electricity supply, after remaining stagnant in the previous quarter.
The real gross value added (GVA) by the secondary and tertiary sectors increased in the second quarter of 2024, while that by the primary sector decreased anew.
The contraction in the primary sector resulted from decreases in both agricultural and mining output in the second quarter of 2024.
Agricultural activity was weighed down by the lower production of animal products and field crops, with the domestic maize crop harvest expected to be more than 20% lower than the 2023 harvest.
The decrease in mining output resulted largely from the lower production of iron ore, coal and diamonds amid ongoing domestic rail and port inefficiencies as well as subdued prices of some commodities.
Nedbank economist Isaac Matshego Khosa said household balance sheets should also improve.
On the liability side, a significant portion of the withdrawals of contractional savings through the two-pot retirement system will likely be directed at debt repayment.
On the asset side, Khosa said the anticipated cyclical recovery in response to easing monetary policy should also lift house and equity prices, contributing to stronger balance sheets and helping to restore financial health.
“Today’s numbers show that consumers are not entirely out of the woods yet, but renewed income growth and contained borrowing have placed households on a slightly firmer financial footing,” Khosa said.
“Household finances will likely strengthen further in the year's second half and throughout 2025. With inflation forecast to remain subdued around the SARB’s 4.5% target, real personal disposable income should recover further. At the same time, falling interest rates will systematically reduce debt service costs, gradually freeing more funds for discretionary spending.”
BUSINESS REPORT