Filomena Scalise

Growth in real final consumption expenditure by households moderated further to an annualised rate of 2.9% in the second quarter from 3.1% in the quarter before‚ the SA Reserve Bank’s September quarterly bulletin (QB) released on Tuesday reveals.

The 2.9% was the lowest rate of increase since the second quarter of 2010.

Consumption expenditure is key for domestic growth‚ and a slowing in the growth of consumption expenditure by households does not bode well for overall economic growth.

The moderation in spending resulted from a contraction in real outlays on services‚ whereas firm growth in real expenditure was recorded across all other categories.

Spending on services accounts for some 25% of total household spending.

The bulletin noted that persistent increases in the prices of non-discretionary items‚ including the cost of transportation and electricity‚ probably eroded the purchasing power of the household sector to some extent.

Household debt edged higher in the second quarter‚ according to the bulletin.

The Reserve Bank said that growth in household debt outpaced the growth in disposable income of households and caused the ratio of household debt to disposable income to increase from 75.6% in the first quarter to 76.3% in the second quarter.

The cost of servicing household debt rose from 6.8% to 6.9% of disposable income in the second quarter.

The public and private sectors came to the rescue in the second quarter‚ with government consumption expenditure accelerating from an annualised rate of 2.2% in the first quarter to 4.1% in the second quarter‚ while real gross fixed capital formation increased at an annualised rate of 5.7% in the second quarter following growth of 5.3% the quarter before.

The increase in government spending alongside a faster pace of gross fixed capital formation saw the growth in aggregate real gross domestic expenditure accelerate to 4.7% from an annualised rate of 4.3%.

Some improvement in private-sector confidence levels saw growth in real gross fixed capital formation by private business enterprises accelerate from an annualised rate of 1.8% in the first quarter to 2.4% in the second quarter.

Fixed capital formation by public corporations increased at a slower pace over the period‚ the bulletin reported. - I-Net Bridge