While South Africa narrowly avoided a technical recession in the 1st half of 2014, given that 2nd quarter GDP (Gross Domestic Product) growth returned to positive growth territory, a closer look at the numbers still pointed to a deterioration in the situation for South Africa’s Household Sector.
The one economic sector that probably best reflects the financial state of the Household/Consumer sector is the sector called “Retail and Wholesale Trade, Catering and Accommodation”.
The 2nd quarter GDP data provided little in the way of surprises for this sector, as it went into its 1st quarter-on-quarter annualized decline/contraction since the 2nd quarter of 2009. This is counter to the improved overall GDP growth rate, and its year-on-year growth rate also declined from the 1st quarter’s +2.1% to +1.4%, reflecting the continuation of a lengthy broad slowdown in year-on-year growth since late-2011.
Given the Household Sector’s propensity to consume just about its entire disposable income, with a net savings rate of close to zero, a slower 2nd quarter growth rate in the Retail and Wholesale Trade sector probably reflects a drop in real Household disposable Income growth too.