‘Disposable salaries unlikely to beat 2016 inflation’
The latest BankservAfrica Disposable Salary Index (BDSI) data for September shows the average disposable salary declined by 0.3% in the first nine months of 2016 on a year-on-year basis.
This is the first time in the BDSI’s records that salaries have declined over a long period of time – and over a year-on-year basis - and augments the sentiment that disposable salaries are unlikely to beat inflation in 2016.
The median disposable salary declined by 0.7% in the first nine months of 2016 compared to the same period in 2015.
Due to these, it comes as no surprise that retail sales are under pressure. Salaried individuals have for some time been paying off their debts and are subsequently purchasing less durable goods such as cars and houses. As a result, South African retail sales, as indicated by Statistics South Africa (Stats SA), were barely positive in August and failed to feature big ticket items such as passenger cars.
The average salary trend reflects slowing real increases. Therefore, despite real average disposable salaries rising by 4% over a four year period, increases are still declining in nature.
While disposable salaries tend to increase towards the end of the year, the trend at present suggests this may not be strong due to higher inflation and weak economic growth.
The rising pension payment trend continues
Unlike disposable salaries, private banked pensions are increasing at a very fast rate, according to the September BankservAfrica Private Pension Index data (BPPI). In the nine months to September, the average pension increased by 1.8% year-on-year. As indicated in August’s BPPI, average pensions is the only income to be growing in real terms and helping to keep retail sales in positive territory.
Although the average pension is increasing, it still falls below the typical median pension that reflects year-on-year increases of 6.8% for the nine months to September this year.
Median pensioners have therefore experienced pension increases at twice the rate of inflation, representing an ‘astounding trend’ as analysed by the BankservAfrica payment system.
Since January 2013, when the BPPI data analysis began, the typical pensioner experienced real increases of 15.2%. The typical pension has increased from 38.5% in January 2013 to 43.5% in September 2016 compared to the typical salary increases.
As such, BankservAfrica’s BPPI data reveals a complete reversal to when salary percentage increases were in the lead. Since January 2015, there has not been a month where the increase in the typical pension has been less than the typical salary. The average income from pension fund investments has been astounding over the last few years.
It is estimated that approximately 3.5% more people receiving a private pension than at the start of 2013.
The aging population and the performance of pension assets are certainly having a positive impact on the overall buying power of older South Africans. It is here that the weaker currency has shown more favourable results for the South African economy.
Graph 1: Real pensions have increased while salaries, although at high levels, have not risen as quickly
Source: BankservAfrica and Economists dotcoza.
Total disposable salary payments from January 2013 increased by 27.4% in nominal terms while the total pension payments increased by 37.6% over the same period.
Graph 2: Private pensions and disposable salary data
