How South Africans have adjusted spending habits amid rising costs

Data across Nedbank’s approximately 1.5 million main-banked clients shows that personal incomes were down an average of 3% in 2023 versus 2022 – a sharp turnaround from the 10% jump between 2021 and 2022. This sample includes its customers who received income or transacted during the July to December period.

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However, this stands in contrast with BankservAfrica’s Take-home Pay Index, a measure of salaries across formal employment. It shows an average increase of 5% across those six months. This data reflects the trend across 4 million monthly salary payments loaded into the National Payment System.

(It is possible for both these data points to be true as they are measuring slightly different things.)

Nedbank highlights that this income data is an average, with “some clients receiving increases above inflation, some clients below inflation as their employers could not afford higher increases and some clients that may have lost or seen a reduction in their income”.

With interest rates at the highest level since 2009, it is no surprise that the amount spent on loan repayments across Nedbank’s client base is up.

Home loan payments have increased by 9% on average in the past year, following a 15% rise between 2021 and 2022. Repayments on vehicle finance are up 5% (after a 6% rise between 2021 and 2022), and those on personal loans are 6% higher. The bank notes that “consumer disposable income [is] under pressure”.

Cutting back on essentials

As interest rates bite, and with a significant increase in the cost of living, South Africans have had to trim their spending – even across so-called ‘essential expenditure’.

The Nedbank data shows we are spending 10% less on fuel and 2% less on groceries than a year ago.

The increase in healthcare spending is 6% – in line with broader inflation but lower than healthcare inflation, meaning that utilisation is in decline.

The average spend on education is up 4% between 2022 and 2023.

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Not disclosed in the Nedbank data is the average spend on insurance, which could certainly be classified as essential expenditure.

From Stats SA consumer price inflation (CPI) data, we can see that insurance inflation increased in February, after tracking in line with inflation (roughly 5%) for some time.

In February, insurance inflation was 9.5% as premium increases were enforced by insurers.

Extreme weather impacts last year, especially the Gauteng hailstorm in November, have meant steep increases in premiums across the board.

The cuts in spending have, obviously, not only been on essential expenditure.

Non-essentials

Nedbank’s data shows declines in spend across three of four main categories. Home improvement expenditure in the second half of 2023 was 9% lower than the same period in 2022, while spend on clothing is down by 3% and 1% lower on alcohol.

One can see the impacts of the drop in spend on home improvement and clothing among the listed retailers, where sales growth has been tepid (in some instances, there have even been declines).

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Factor in price movement, which was exacerbated by the ports crisis towards the end of the year, and volumes are down across most players.

The only category of the four where spending is up is fast food, with a 3% increase between 2022 and 2023. Famous Brands – which, given its scale, is a useful proxy for the sector – reported a weighted retail sales price increase of 3.8% in July and August.

This article was republished from Moneyweb. Read the original here