Growth in South African household spending slowed to 7,5% year-on-year in the first quarter from 7,75% in the last quarter of last year, while debt reached record levels, the central bank said on Thursday.
A household spending boom has contributed to high economic growth of 5% last year, but it has also added to inflationary pressures.
Debt levels rose to 76% of disposable income, from 73,75% in the fourth quarter.
The robust pace of consumer spending, despite higher interest rates, was based on a strong increase in disposable income, the central bank said in its June quarterly bulletin.
Gross domestic expenditure growth, which includes government expenditure, slowed to 5,75% in the first quarter, compared to 12,25% previously, largely due to a slower pace of inventory accumulation.
The central bank hiked interest rates by 50 basis points to 9,5% in June, adding to a 200 basis points increase it made from June to December last year.
It said slower spending growth on services by households accounted for the slowdown but consumers were still spending on semi-durable and non-durable goods.
Higher spending by government boosted gross expenditure.
”This was mainly due to increased expenditure by both provincial and local governments, driven by the need to further upgrade and maintain general infrastructure,” the central bank said in the bulletin.
Gross fixed capital formation accelerated by 21,75% from an annualised 16,5% in the fourth quarter of 2006, thanks to buoyant growth in real gross fixed capital formation by the government and the private sector.
Real gross fixed capital formation by private contractors maintained its upward trend, helped by the construction of a high-speed rail in Gauteng, the reserve bank said. – Reuters