'Collapse' in real take-home pay - salary index

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Real take-home pay "collapsed" in June 2018, according to the latest BankservAfrica Take-home Pay Index released on Tuesday. 

In current terms, salaries increased by 2% on a year-on-year basis in June. But an inflation increase of 4.6% over the same period means real take-home pay decreased by 2.4%. This represents the largest decline since January 2017.

The salary decrease was mainly due to the three-month delay in annual salary adjustments of the public sector.

Public sector wage increases backdated to April were only paid in July and impacted the level of real take-home pay, economist Mike Schüssler told Fin24 after the release of the data. 

The public sector - the largest employer in South Africa - makes up about 30% of the BankservAfrica Take-home Pay Index.

Schüssle said the collapse was temporary. He foresees that, although the decrease impacted retail sales in June, there could be an improvement in July - although he still expects another month of relatively weak retail sales. 

"I don’t know if there will be enough of an improvement to boost strong positive numbers, maybe 1% higher than inflation," he said. 

Schüssler added it is likely that consumer spending will be constrained until July when government institutes increases and allots back payments from April.

"I think people get very small real increases on take-home pay. This influences their everyday ability to do things and shows consumers are probably under a lot of stress - probably struggling to make ends meet," said Schüssler.

"Their money is not becoming more. Even if the SA economy recovers, I don't think it will be a major recovery. We are still in an era where people are struggling, and take-home pay will likely stick around the inflation number. June's 'collapse' is only temporary."

BankservAfrica Private Pensions

Schüssler said one of the most interesting trends in the last five-and-a-half years has been private pensions, which showed increases above the rate of inflation.

"While pensioners are certainly not as well off as those earning a salary, they have seen their pensions increase above the rate of inflation on a constant basis," he said.

Total pensioner spend, according to BankservAfrica data, increased from 9.6% of total take-home pay banked to 11.4%. Pensioners are fewer in number than those in the workforce and receive only about half of the income of employed people.

The BankservAfrica Private Pension Index (BPPI) for June shows that the real average pension paid into bank accounts increased to R7 008. This is the first time that real private pensions increased above R7 000 per month. The increase of real pensions is again above the 5% threshold. It currently stands at 5.5%, the index report shows.

In real terms, the average pension increased to R7 668 for the month of June. The increase in nominal terms was 10.2% or more than twice the inflation rate. 

"Pension data is positive in every measurable way and indicates pensioners are able to play a more important role in the economy", according to the index report.

"Consumer spending was at least helped by the increase in private pensions which explains the continuing increase in some of the consumer spending such as retail."

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