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By Citizen Reporter

Journalist


Real salaries drop for seventh consecutive month in December

Below inflation salaries likely to continue into Q1 2017, while private pensions record first real-term drop.


South African’s inflation adjusted salaries dropped in December 2016 – reflecting a fall for seven consecutive months in a row. Real salary adjustments in December reflected the longest – and fastest –  decline since the BankservAfrica Disposable Salary Index (BDSI) data started in 2011.

As mentioned in previous BDSI indices – which applies to December’s findings – these declines are partly due to salary adjustments linked to the previous year’s inflation. These adjustments were lower in 2016.  The tough economic conditions also added further pressure.

On a year-on-year level, disposable salaries in December 2016 were lower than December 2015 and 2014.  However, the December 2016 salary level was also partly due to smaller year-end bonus pay-outs.  Also, the rate of salary adjusted increases was slower than that of consumer prices which increased due to wage agreements where previous inflation figures were lower.

The 1.5% year-on-year decline is likely to impact consumers in the months to come. Domestic consumers under this sort of income pressure are less likely to make major purchases such as cars, houses and furniture.

There is no doubt that most consumers were under pressure for most of 2016 and parts of 2015. The December BDSI suggests that this will continue in Q1 2017 as overall consumer expenditure is expected to remains subdued with lower than inflation salaries likely to continue in the next few months.

However, as 2017 increases will be based on higher inflation in 2016, the real declines should disappear as soon as the annual salary increases are implemented from March/April and the months that follow.

Employees in the South African formal sector have certainly not had anything to cheer about in 2016 apart from keeping their jobs. The weak rand and drought had a devastating impact on real incomes of employees and their families as inflation hurt consumers’ pockets.

The average employee received R14 102 in their bank account in December while the median was R10 397. Both of these are in nominal terms.

There was a silver lining in that there was a slight increase in the number of employees on the payment system. This was 0.7% higher than December 2015.

Graph 1: After inflation changes in take-home salaries and bankable pensions

1

Source: BankservAfrica and Economistscoza

Private Pensions drop in real terms for the first time since mid-2014

Like salaries, private pensions showed real-term declines on a year-on-year basis. The BankservAfrica Private Pensions Index (BPPI) of pensions that are paid into South African bank accounts showed a 1.7% year-on-year decline in real-terms.

This decline is likely the result of the stronger rand and the weakened equity market.

Pensioners who for the last two years have seen their incomes increase faster than employees are experiencing the first signs of a decline in real income. However, the overall buying power of pensioners is still increasing more than inflation.

Table of disposable salaries and private pensions

Month Nominal Ave Disposable Salaries Real Disposable Salaries Nominal BDSI % change YoY Real BDSI % change YoY Nominal Smoothed Ave Private Pension Real Private Pension Nominal BPPI % change YoY Real BPPI % change YoY
Jan-15 12808 11560 6.6% 2.1% 5735 5176 9.6% 4.9%
Feb-15 12576 11279 7.1% 3.0% 5557 4984 9.8% 5.7%
Mar-15 12271 10850 4.6% 0.5% 5656 5000 9.6% 5.3%
Apr-15 11996 10514 4.5% 0.1% 5702 4997 10.0% 5.2%
May-15 12322 10771 0.8% -3.6% 5804 5073 9.9% 5.1%
Jun-15 12551 10924 2.9% -1.7% 5766 5018 8.9% 4.0%
Jul-15 12965 11167 4.4% -0.5% 5854 5042 9.1% 3.9%
Aug-15 13052 11242 7.8% 3.0% 5873 5058 9.2% 4.4%
Sep-15 13005 11201 6.2% 1.6% 5947 5122 10.1% 5.3%
Oct-15 12954 11129 4.6% -0.1% 5946 5109 9.0% 4.2%
Nov-15 12969 11132 4.8% 0.1% 6125 5258 7.7% 2.8%
Dec-15 13413 11484 5.5% 0.2% 6116 5237 6.9% 1.6%
Jan-16 13710 11648 7.0% 0.8% 6131 5209 6.9% 0.6%
Feb-16 13432 11259 6.8% -0.2% 5992 5022 7.8% 0.8%
Mar-16 13012 10825 6.0% -0.2% 6075 5054 7.4% 1.1%
Apr-16 12877 10624 7.3% 1.1% 6155 5079 8.0% 1.6%
May-16 13142 10825 6.7% 0.5% 6224 5127 7.2% 1.1%
Jun-16 13266 10865 5.7% -0.5% 6267 5132 8.7% 2.3%
Jul-16 13488 10957 4.0% -1.9% 6353 5161 8.5% 2.4%
Aug-16 13484 10963 3.3% -2.5% 6442 5238 9.7% 3.5%
Sep-16 13755 11165 5.8% -0.3% 6474 5255 8.9% 2.6%
Oct-16 13413 10834 3.5% -2.6% 6445 5206 8.4% 1.9%
Nov-16 13624 10970 5.1% -1.5% 6564 5285 7.2% 0.5%
Dec-16 14102 11309 5.1% -1.5% 6420 5149 5.0% -1.7%

Source: BankservAfrica and Economistscoza

-Brought to you by Moneyweb

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