SA spending contracts

Filomena Scalise

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Johannesburg - South African spending contracted for the first time since 2009 in the fourth quarter as the government cut back on expenditure and investment growth slowed.

Gross domestic demand, which includes consumer, government and investments, fell an annualised 0.9 percent in the final three months of the year compared with an expansion of 4.1 percent in the previous three months, the Reserve Bank said in its Quarterly Bulletin released in Pretoria today.

Africa’s biggest economy grew 2.5 percent last year, the slowest pace since a 2009 recession and less than half the 7 percent expansion the government estimates it needs to meet its jobs goals.

A weaker rand and rising food and fuel prices is adding to pressure on inflation, making it difficult for the central bank to reduce interest rates to spur spending.

“Household consumption expenditure continued to be constrained by slower growth in disposable income of households and rising inflation,” the bank said.

Consumer confidence dropped to the lowest level since 2008 last year, undermining household expenditure, which accounts for about 60 percent of total spending in the economy. Growth in consumer spending slowed to an annualised 2.4 percent in the final three months of last year from 2.7 percent in the third quarter, the bank said.

Government spending contracted 0.7 percent last quarter compared with an expansion of 8.3 percent as the “relatively high level of spending on armaments in the third quarter was not repeated,” the bank said. Gross fixed capital formation rose an annualised 4.3 percent, down from 5.6 percent in the third quarter.

Household debt eased to 75.8 percent of disposable income compared with 76.2 percent in the previous quarter, it said. - Bloomberg