Pretoria - South Africa’s real gross domestic expenditure increased by 3.5% in the first quarter of 2013, the South African Reserve Bank (SARB) said on Wednesday.
“Following a contraction previously, both real final consumption expenditure by general government and real inventory holdings increased in the first quarter,” said the central bank in its June Quarterly Bulletin.
In the fourth quarter of 2012 real gross domestic expenditure declined by 0.9%.
Growth in real final consumption expenditure by households slowed marginally to 2.3% in the first quarter from 2.4% in the fourth quarter amid dwindling consumer confidence levels.
Growth in real spending on durable goods slowed from an annualised rate of 6.1% in the fourth quarter of 2012 to 5.4 percent in the first quarter of 2013 -- the lowest rate of increase in almost four years.
“This slower growth could probably be attributed to the moderation in real disposable income growth and in unsecured lending extended to households as banks appear to be tightening their lending practices in view of a deterioration in the risk profile of consumers,” noted the bank.
“Spending on durable goods has gradually lost momentum since the fourth quarter of 2011 as the household sector increasingly experienced higher levels of financial stress, exacerbated by rising inflation and slower growth in real disposable income,” it added.
According to the bulletin, real disposable income of households moderated somewhat to 2.2% following an increase of 2.4% in the fourth quarter of 2012.
The slower pace of increase in the disposable income of consumers could largely be attributed to slower growth in compensation of employees over the period, said the bank.
Nedbank economists, in a research note following the release of the bulletin said growth in household spending was likely to remain moderate in the coming months.
“The consumer confidence is weighed by the poor economic outlook, which is affecting job creation and heightens worries about job security. Added to this, high debt levels and tight lending standards will contain credit growth, while high inflation will erode disposable incomes, partly offsetting the benefit from income growth,” said Nedbank.
Growth in household consumption expenditure is forecasted to slow to 2.6% this year from 3.5% in 2012.
Nedbank said that with the poor economic outlook, weak export demand and weak consumer spending, firms are likely to remain hesitant to commit on large capacity expansions.
“Therefore, growth in fixed capital formation by the private sector will be weak, while that by general government may remain relatively firm as the infrastructure programme continues,” it added. - SAnews.gov.za
