Filomena Scalise

Growth in real final consumption expenditure by households slowed to an annualised 3.1% in the first quarter of 2012 from 4.6% in the quarter before, the SA Reserve Bank's June Quarterly Bulletin (QB) released on Thursday reveals.

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

The moderation in spending was particularly evident in the categories for durable and semi-durable goods and in he services component.

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

Household expenditure on non-durable goods, however, increased at a somewhat faster pace over the period, the bulletin noted.

Growth in real disposable income of households moderated to 3.2% in the first quarter following an annualised increase of 4.7% the quarter before, primarily reflecting slower growth in compensation of employees, according to the bulletin.

The ratio of household debt to disposable income inched marginally lower to 74.7% from 74.8% in the fourth quarter of last year, while the debt-service cost of the household sector remained unchanged at 6.7% of disposable income.

Growth in aggregate real gross domestic expenditure decelerated to 4.3% from an annualised rate of 5.1%.

The moderation in the pace of spending could be attributed to slower growth in real domestic final demand which was partly offset by a further accumulation of real inventories.

The bulletin reported that growth in real gross fixed capital formation lost some momentum in the opening months of 2012, moderating to an annualised 5.3% in the first quarter from 7.2% in the fourth quarter of 2011.

Slower growth in capital spending by private business enterprises primarily accounted for the deceleration in total investment spending over the period.

The bulletin noted, however, that it was encouraging that building and construction sentiment improved in both the first quarter of 2012 and final quarter of 2011. - I-Net Bridge