/ 24 June 2010

SA household spending increases

Spending in South Africa's economy increased in the first quarter of 2010, the central bank said on Thursday in its June quarterly bulletin.

Spending in South Africa’s economy increased in the first quarter of 2010, mainly supported by a faster pace of economic growth in the period, the central bank said on Thursday in its June quarterly bulletin.

The South African Reserve Bank said gross domestic expenditure rose by 12.1 percent on a seasonally adjusted and annualised basis in the first quarter, compared with 4.9 percent in the previous quarter.

The economy accelerated its recovery pace to 4,6% in the first quarter, after exiting its first recession in almost two decades in the third quarter of 2009.

Growth in household spending quickened to an annualised 5,7% in the first quarter, from 1,6% in quarter four.

The central bank said household expenditure rose due to higher disposable income, reduced borrowing costs after interest-rate cuts, relatively low inflation and rising confidence levels.

The central bank cut interest rates by 550 basis points between December 2008 and March 2010 and inflation has slowed to four-year lows.

The ratio of household debt to disposable income slipped to 78,4% in the first quarter compared with 79,9% in the fourth quarter, and debt service costs to disposable income also receded slightly.

After three consecutive quarters of declines, gross fixed capital formation increased slightly by an annualised rate of 0,2 %, from -0,9% in quarter four mainly due to public enterprises investment, but private sector investment was still negative. — Reuters