GDP data show pressure on households

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While South Africa narrowly avoided a technical recession in the second quarter, a closer look at the gross domestic product (GDP) numbers showed these still pointed to a deterioration in the household sector during the quarter, FNB said yesterday.

Household and property sector analyst John Loos said the data provided little in the way of surprises for the sector.

GDP figures released by Statistics SA on Tuesday showed there was a dramatic slump in the retail and wholesale trade, catering and accommodation sector, influenced by the knock-on effect of the mining and manufacturing strikes. The sector contracted at an annualised pace of 0.2 percent quarter on quarter compared with the first quarter’s 2.1 percent expansion.

Loos said the household sector went into the first seasonally adjusted quarterly decline since the second quarter of 2009.

He said given the propensity of households to consume almost their entire disposable income, with a net savings rate of close to zero, a slower second-quarter growth rate in retail and wholesale trade probably reflected a drop in household disposable income growth too.

Loos said a further look at the GDP-related numbers revealed further slowing in the total domestic nominal wage bill growth from 7.2 percent in the first quarter to 6.5 percent in the second, year on year.

“This, coupled with an elevated consumer inflation rate, also points to the likelihood of lower real disposable income in the second quarter, with the wage bill being by far the biggest single source of household income,” he said.

He said in addition, the current poor level of GDP growth, along with the relatively high wage bill-to-GDP ratio, did not appear to be an environment where there would be major employment growth. More likely, it would still be one of labour shedding.

Loos said while the overall GDP data pointed to some growth, a detailed look at the numbers related more directly to the household sector appeared to reveal a weaker second quarter compared with the first quarter, a key risk in these times of social tensions.

Standard Bank said car lending was starting to show strain from the economic slump. It said in its half-year results it had stopped instalment sales credit, given a low appetite for risk and a near doubling of its credit-loss ratio.

Depressed consumer confidence and a weak rand stoking higher vehicle prices was crimping loans, the Reserve Bank warned in June. Annual growth in instalment sales credit, which accounts for most car financing, slowed to 11 percent in June from 16.6 percent at the end of 2012. – Additional reporting by Bloomberg



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