SA consumers gradually on the recovery path - salary index

Cape Town - Disposable salaries have beaten inflation since March this year, a sign that South African consumers are slowly recovering, according to the latest BankservAfrica Disposable Salary Index (BDSI).

Average take-home pay bounced back in October after a decline in September, while pensions reached a new high in October. The BDSI real salary was R13 990 for October this year, R16 less than September, but R62 more than October last year. In nominal terms, the BDSI recorded an average of R14 499.

“With the South African household debt to income ratio declining, along with slightly lower interest rates since July, the SA consumer is recovering slowly as disposable salaries have beaten inflation since March this year," according to Mike Schüssler, chief economist at Economists dotcoza.

"September’s decline was probably an anomaly and the trend of a small increasing real wage should continue, as long as inflation remains around current levels.”

The BDSI - a measure of real take-home pay – indicates pay cheques to formal sector employees in SA increased by 0.5% after inflation in October. This follows from the 1.3% decline in September on a year-on-year basis.

According to the report, this indicates the September "slump" was likely just a deviation from the increasing salary trend.

Schüssler cautioned, however, that a looming fuel price shock in December could derail the positive real take-home pay trend, which is currently slightly above inflation. Price shocks from electricity could also have an additional impact.

The BankservAfrica Private Pension Index (BPPI) shows that pensions paid increased by 31.3% in September, while the total amount increased by 38.6%.

Real pensions averaged R6 457 for the month and R6 859 in nominal terms.
“The increase is, in part, due to extra payments for Transnet pensioners, which we estimate accounted for about 35% to 40% of the increase. Some other pensioner ‘bonuses’ were also paid into pensioners’ bank accounts, further contributing to the unusual increase," explained Schüssler.
The size of the extra payments to pensioners in October this year was a nominal R1.6bn compared to the same time last year. This represents the biggest extra payment amount since April 2015.

The average pension, as well as the median pension, has been performing well over the last few years, having consistently outperformed inflation. This indicates that interest rates play an important role in the performance of pension payments, according to the report.

"In real terms, the value of the total pension pay-out was the highest on record and will probably make a substantial difference to retail sales if it has not already,” said Schüssler.

“It does, however, seem that many pensioners had a once-off bonus, meaning that their individual pension doubled for the month.”

For the first time on record, aggregate pensions were 13.5% of salaries paid, which is unusual as the pensions values paid normally totals about 10.3% of salaries over the last year.

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