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Standard Bank Group
The SA Daily 22 March 2019

Household expenditure up, on debt

  • The SARB Quarterly Bulletin shows the household debt to income ratio rising to 72.7% in 4Q18, from 71.8% in 3Q18. And, household debt rose 6.9% y/y, from 5.1% y/y, but household disposable income slid to 4.9% y/y, from 5.3% y/y.
  • Households have had to debt-finance household consumption expenditure (HCE) which shot up to 3.2% q/q in 4Q18, from 0.6% q/q in 3Q18; cyclical consumption rose 8.2% q/q, from 2.4% q/q in 3Q18, and non-cyclical consumption grew 2.0% q/q, from just 0.1% q/q in 3Q18.
  • This moderation in household disposable income (labour plus non-labour income) to 5.7% in 2018, from 7.9% in 2017, can be ascribed to labour income (wages and salaries) slowing down further. Non-labour income (property income receipts) grew 13.5% in 2018, from 8.5% in 2017; this, alongside rising debt, has supported HCE growth.
  • Debt-service costs edged to 9.3% in 4Q18, from 9.1% in 3Q18, due to the 25 bps rate hike in November 2018. However, we foresee no rate hikes in 2019, and therefore expect modest HCE growth, partly financed through debt.
  • Still, moderating labour income, higher unemployment and inconsistent electricity supply compel us to trim 2019 HCE growth to 1.5%, from1.6%, and GDP growth to 1.1%, from 1.3%.
  • GFCF (gross fixed capital formation) growth will take time because of ongoing power cuts and very low business confidence.

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