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Spending on durable goods such as cars contracted 11.2% in the second quarter, reflecting preemptive purchases ahead of the VAT increase.
Spending on durable goods such as cars contracted 11.2% in the second quarter, reflecting preemptive purchases ahead of the VAT increase.

Households spend less in second quarter as drop in disposable income bites hard

ECONOMIC NEWS

By Sunita Menon - Sep 25th 2018, 10:33

Households were under strain in the second quarter of 2018, a report from the SA Reserve Bank shows.
 

The quarterly bulletin indicated that household consumption fell to levels last seen two years ago in the second quarter of 2018. Compared to the first quarter, when household consumption expenditure was 1% higher than in the previous quarter, it contracted 1.3% in the second quarter as spending on goods declined while spending on services increased at a slow pace.

Notably, spending on durable goods such as vehicles or household items contracted 11.2% in the second quarter. This reflected preemptive purchases ahead of the VAT increase, which took hold on April 1, as well as the subdued economic environment, the bank said.

"The decline in household real disposable income, largely due to tax increases and fuel-price hikes in the second quarter of 2018, adversely affected real household consumption expenditure," the quarterly bulletin reads.

However, in spite of the contraction in the second quarter, households are still in a better position than they were in 2017. In the first half of 2018, household spending was 2.3% higher than in the same period in 2017.

Meanwhile, SA's international investment position deteriorated in the first three months of 2018 as the value of foreign assets decreased more than foreign liabilities.

This was a steep drop to R362bn at the end of March compared to R476bn at the end of December 2017. Outward investment decreased 3.5% to R6.67-trillion in the first quarter of the year after a decrease of 2.9% the previous quarter.
Business Live 

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