Household finances are expected to rebound this year

Household finances are expected to improve after increasing further in the first quarter as economic activity recovered during the period on less restrictive lockdown measures. Picture: Steve PB/Pixabay

Household finances are expected to improve after increasing further in the first quarter as economic activity recovered during the period on less restrictive lockdown measures. Picture: Steve PB/Pixabay

Published Jun 30, 2021

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HOUSEHOLD finances are expected to improve after increasing further in the first quarter as economic activity recovered during the period on less restrictive lockdown measures.

The SA Reserve Bank (SARB) Quarterly Bulletin yesterday showed that personal disposable income rose 2.3 percent year-on-year.

SARB said low interest rates and subdued inflation pushed household consumption spending higher.

It said that household consumption expenditure rose 4.7 percent over the quarter, slower than 7.5 percent in the last quarter of 2020.

SARB said households’ net wealth increased further in the quarter as the increase in total assets outweighed that in total liabilities.

It said the value of assets was boosted by an increase in equity holdings in particular, as share prices increased substantially further.

Investec economist Lara Hodes said there was an improvement in disposable income. Hodes said there had been some growth in household debt as well, supporting household consumption expenditure.

She said growth in household consumption expenditure, which comprises around 60 percent of gross domestic product, was likely to be modest in the medium term. “Going forward, the government’s infrastructure development drive should support eal gross fixed capital formation in the medium-term,” Hodes said. “However an accelerated, efficient vaccination drive is imperative to curb future waves and associated lockdowns, raise confidence and place South Africa on a sustainable growth trajectory.”

Stocks in the JSE reached new highs in the opening months of the year in line with international share prices.

SARB said growth in domestic residential property prices accelerated slightly further over the period supported by increased demand amid the prevailing low interest rates.

However, real household consumption expenditure and personal disposable incomes are still below pre-crisis levels despite showing notable improvement.

Consumers have remained cautious of taking on more debt on the back of a gloomy economic outlook, a slow vaccination drive and job losses.

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