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Householders Throttle Back on Spending

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Growth in real final consumption by households eased to an annualised 3.1% in the first quarter of 2012 from 4.6% in the fourth quarter, said the Reserve Bank.

“Having increased at an annualised rate of 4.6% in the fourth quarter of 2011 and 5% for the year 2011 as a whole – i.e. at a much faster pace than growth in gross domestic product – growth in real final consumption expenditure by households slowed to an annualised rate of 3.1% in the first quarter of 2012,” said the bank in its June Quarterly Bulletin.

The moderation in spending was for the most part evident in the categories for durable and semi-durable goods and in the services component.

The bulletin noted that spending on non-durable goods increased at a somewhat faster pace over the period.

Growth in real disposable income of households moderated to 3.2% in the first quarter of 2012 following an annualised 4.7% increase in the fourth quarter.

“This slower pace of increase primarily reflected slower growth in compensation of employees,” noted the bulletin on Thursday.

The ratio of household debt to disposable income inched lower to 74.7% per in the first quarter of 2012 from 74.8% in the fourth quarter of 2011.

The debt-service cost of the household sector remained at 6.7% of disposable income in both the fourth quarter of 2011 and first quarter of 2012.

“The lower ratio of indebtedness and trends in consumer spending and income suggest that many consumers continued to use their disposable income to reduce their outstanding financial commitments, rather than increase their spending on final goods and services.”

According to the bulletin, growth in real fixed capital formation moderated to an annualised 5.3% in the first quarter from 7.2% in the first quarter of 2011.

“Slower growth in capital spending by private business enterprises primarily accounted for the deceleration in total investment spending over the period.”

Consumption expenditure is important for domestic growth. – BuaNews

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Alan Straton

Chief Cook, Bottle Washer and Broom Mechanic at MyPE
Passionate about Port Elizabeth and definitely NOT packing for Perth. Alan's ethos is epitomised in the words of Nelson Mandela; "I have fought against white domination and I have fought against black domination. I have cherished the idea of a democratic and free society. If need be, it is an ideal for which I am prepared to die." See more articles by Alan.