Household spending on the rise

25 June 2010

South African household spending increased by 5.7% in the first quarter of 2010, compared to a 1.6% rise in the fourth quarter of 2009, according to the Reserve Bank’s latest quarterly bulletin.

The expansion of the spending by households was evident in all spending categories with the exception of spending on services.

“Household expenditure appears to have been positively influenced by several factors, including an acceleration in the growth rate of real disposable income, the reduced cost of credit as a result of lower interest rates, relatively low inflation, rising confidence levels, and an improvement in households’ net wealth as the prices of real estate and other assets continued to rise,” the central bank said on Thursday.

According to the Bank, growth in real expenditure on durable goods surged at annualised rates of 15.2% in the fourth quarter of 2009 and 16.8% in the first quarter of 2010.

Cars, entertainment goods

Increased outlays on durable goods could mainly be ascribed to buoyant expenditure on new vehicles, recreational and entertainment goods, and on furniture and household appliances.

“The appreciation of the exchange rate of the rand caused the prices of goods with a high import content to become more competitive, which probably also encouraged consumers to acquire durable goods,” it said.

Clothing and footwear

Semi-durable goods, which has experienced three successive quarters of decline in real spending, this household expenditure component rebounded rising to an annualised rate of 28.4 percent in the first quarter of 2010.

According to the Quarterly Bulletin the increase resulted primarily from increased outlays on clothing and footwear and entertainment goods among others.

“These increased outlays, although rising strongly, were from a low base. Year-on-year growth in spending on semi-durable goods amounted to 2.9% in the first quarter of 2010.”

Petroleum products

Non-durable goods increased by 9.5% in the first quarter of 2010 following on six quarters of uninterrupted contraction. Along with the rising spending by households on vehicles notable increases were recorded in the sale of petroleum products.

Real household spending on services declined at an annualised rate of 4.6% in the first quarter of 2010. It followed an increase of 1.6%in the first quarter of 2009. The decline is attributed to reduced spending on transport services.

It said that the pace of increase in real final consumption expenditure by general government accelerated to 7.3% in the first quarter of 2010. This was primarily due to the acquisition of two military aircraft, while real salary outlays also edged higher.

“Excluding spending on armaments, growth in consumption expenditure by general government slowed marginally from an annualised rate of 5.2% in the fourth quarter of 2009 to 5% in the first quarter of 2010,” said the central bank.

Source: BuaNews