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The SA Daily 28 January 2020

Dec PSCE likely steady

Shireen Darmalingam

  • December M3 and PSCE: PSCE growth is expected unchanged at 6.6% y/y for December 2019; Bloomberg forecasts 6.35% y/y.
  • We look to consumer credit growth momentum as this will be a key driver of consumer spending and therefore economic growth this year. Consumer credit growth has averaged 5.2% y/y since 2010. In 2019 Jan-Nov, credit extended to households increased by an average of 6.4%, compared to an average to 4.5% Jan-Nov 2018. Credit extended to corporates grew by an average of 7% in the 11 months in 2019, compared to 6.7% in 2018.
  • Consumer spending growth is still being supported by real income growth despite weak employment and SA’s ongoing loss of skills to emigration. Higher-income earners have been, disproportionately, driving aggregate consumer spending, with their spending power boosted by non-wage income, particularly investment income. They have also typically had above-average real wage growth.
  • We expect household consumption expenditure (HCE), which accounts for nearly two-thirds of GDP, to advance by 1.2% y/y in 2020, from an estimate of 1.1% y/y for 2019. HCE is then expected to improve further by 1.6% y/y in 2021. Such HCE growth would be a major contributor to GDP growth in 2020/1. GDP growth is estimated at 0.8% in 2020 and 1.5% in 2021.

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