Consumer spending slows amid Eurozone concerns

By Staff Writer

Spending by households and the government slowed to 3,1% and 2,2% respectively from 4,6% and 7,3% from the fourth quarter of 2011, figures from the South African Reserve Bank revealed. The drop in spending comes after the Eurozone slipped back into recession, while activities in major countries such as China weakened and conditions in the US remained tough. “This leaves South Africa vulnerable, particularly to the Eurozone, given that Europe is one of the country’s biggest largest trading partners,” said Nedbank in a note after the release. 


Interest rates could be cut following the drop in domestic spending. But Nedbank said this would only occur if global and local markets suffer further. “However we still feel that the Reserve Bank would prefer to keep rates steady for longer and will only feel compelled to cut if the global and local environment deteriorates dramatically, pointing to a deep recession. We therefore still expect interest rates to remain steady for the remainder of this year,” added Nedbank. 


Households did however contain borrowing, resulting in the household debt-to-disposable income ratio decreasing only slightly to 74, 7% from 74, 8% in the final quarter of 2011. The debt service cost to disposable income ratio also remained unchanged at 6, 7%.


Figures from the Quarterly Labour Force Survey (QLFS) conducted by Statistics South Africa (Stats SA), shows South Africa’s official unemployment rose slightly from 25 per cent in the first quarter of 2011 to 25,2 per cent in the first quarter of 2012. Despite the creation of 304 000 job opportunities in the year to the first quarter of 2012, the pace of increase was not enough to prevent the number of unemployed people increasing by 164 000. The number of discouraged work-seekers also rose by 112 000 over the same period.


“Worries about job security will be heightened while higher inflation essentials will erode purchasing power. This will cause consumers to exercise caution on their spending. As a result, growth in household spending is expected to moderate to 4.2% this year, down from 5% in 2011,” said Nedbank.


Merchandise exports fell by 2, 4% q-o-q, the first drop since the fourth quarter of 2009, to a seasonally adjusted and annualised R697, 7 billion from R714, 8 billion in the first quarter. Net gold exports dropped by 6, 8% q-o-q to a seasonally adjusted and annualised R79, 3 billion from R85 billion. “Weak demand from Europe and slower growth in key emerging markets will place more pressure on exports but continued consumer spending is expected to prop up imports,” added Nedbank.

Recent Articles

Featured Rating agencies may come knocking

It is only the middle of February, but the rand has already made two big moves. The first was the rand moving from R14.60 to R 13.20 at the beginning of the year, as emerging markets (EM) became fashionable again. The second was where the rand gave away nearly 90 cents in 2 weeks as the EM rally ran out of steam, and local events started to hit the headlines.

Read more

The cost of sending money home to neighbouring countries

Transferring money home within the Southern African Development Community (SADC) provides vital financial support for many households in neighbouring countries.

Read more

Student bank accounts: Which come out on top?

Being a student signals budgeting and not having a lot of money at your disposal. This means streamlining expenses such as your grocery costs and entertainment budget. But what if your bank account is in fact costing you more than you can afford?

Read more

Can you afford an ambulance in South Africa?

When a loved one is straddling the line between life and death, you won’t hesitate to call an ambulance. This week, Justmoney found out how much an ambulance ride costs in South Africa, whether you can refuse to get into an ambulance, and who pays the bill if you’re unconscious. 

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

President Hotel Easter Special

Price: From R1,500
When: 15 March to 30 April
Where: Cape Town

Kulula-Preskil Island Resort Special

Price: R16,999
When: 11 May -14 September
Where: Mauritius

A Touch Of Madness Tuck In Tuesday Special

Price: R70
When: Tuesdays
Where: Cape Town