Inflation wreaking havoc on South Africans’ disposable incomes

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While the data shows that take-home salaries rose by 3,5% in October, inflation caused disposable incomes to fall by 2,6% on a year-on-year basis, essentially meaning that consumers are getting poorer.

Data released by Stats SA this week revealed that the country’s annual consumer price index (CPI) for October climbed to 6,4% and, coupled with the BDSI data, suggests that consumers are in for a rough ride in the months to come.

“At present, consumer expenditure in the domestic economy is bleak. Higher consumer inflation is likely to compound the weak domestic economy with real retail sales declining along with home and car sales,” said chief economist Mike Schüssler.

READ MORE: Take-home salaries decline

Dr Caroline Melrose, BankServAfrica head of knowledge and risk services, said that the latest drop in salaries was the longest period of decline the organisation has ever recorded.

According to the BDSI, the average disposable salary for October was R13 413 and the typical disposable salary was R10 061, with both salary levels lower than four months ago and reaching levels similar to those in 2013, indicating that the average salary has failed to beat inflation over the past three years.

In January 2013, the largest percentage of employees were in the R4 000–R10 000 per month take-home salary category. By October 2016, this had changed to the R10 000–R25 000 per month salary category. Schüssler said the shift is in nominal terms and shows the impact of inflation on earnings.

On a positive note, the BankServAfrica Private Pension Index (BPPI) showed that take-home private pension beat inflation, rising by 8,4% for the period and beating inflation for 27 straight months.

READ MORE: Pension funds doing well despite tough economy

The lowest-income category of both employees and pensioners for the percentage of employees with an income of less than R4 000 per month declined, while the number of pensioners receiving less than R10 000 per month decreased by 8%.

Pensioners receiving more than R10 000 per month increased by 86%.

“Clearly the growth in pension payments is far higher than inflation and the growth in numbers of higher-salary earners. Compared to the percentage share of employees who receive more than R10 000 per month, the 37% share of pensioners getting more than R10 000 per month is extremely low,” said Schüssler.

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