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The SA Daily 13 February 2020

Household spending should rise in 2020

Shireen Darmalingam

  • December retail sales contracted by 0.4% y/y, from November’s 2.6% y/y increase. For 2019, total retail sales posted average growth of just 1.2% y/y, compared to 2.4% in 2018. Sales contracted by 3.1% m/m in December, from an increase of 2.0% m/m in November.
  • We nevertheless still see household consumption expenditure (HCE) growth averaging 1.1% in 2019 (from 1.8% y/y in 2018). We also forecast HCE to rise by 1.2% y/y on 2020 and 1.6% y/y in 2021. However, this will depend on benign inflation and continued growth in household credit extension. Further monetary policy easing too would also support spending in 2020. Notably, the more resilient higher-income consumers should continue to support HCE.
  • With consumer confidence having waned further in 2019, the President’s State of the Nation Address today will be scrutinized for progress on government’s reform and recovery agenda for 2020. Finance Minister Tito Mboweni, in his 2020 Budget on 26 February, will likely announce the usual changes to fuel levies and duties on alcoholic beverages and tobacco products. There is also the possibility of another VAT rate hike, which could constrain consumer spending. Households’ tax burdens therefore will come under scrutiny as this is now at the highest in decades.

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