Momentum /UNISA South African Household Wealth Index Q1 2013
According to the Momentum/UNISA Q1 2013 Wealth Report South African households experienced a sharp decline in the pace at which their net wealth grew in the first quarter of 2013 (Q1 2013).The Momentum/UNISA South African household wealth index increased
The much slower increase in the value of household net wealth may be attributed to a sharp deceleration in the pace at which household assets increased. Had it not been for a similar slowdown in the growth tempo of household liabilities, the value of household wealth may have stagnated in Q1 2013. Momentum/UNISA estimated that household wealth increased from R6 282 billion in Q4 2012 to R6 373billion in Q1 2013.
The Momentum/UNISA South African household assets index revealed that real household assets increased at a seasonally adjusted and annualised rate of only 2.3%between Q4 2012 and Q1 2013. This was far slower than the respective increases of 13.6% in Q1 2013 and 28.1% in Q4 2012. The two variables which affected household assets most were the JSE ALSI and household consumption expenditure. The JSE ALSI was mainly affected by negative international and domestic sentiment as to the prospects of company profits, as well as indications of slower growth in profits. The negative sentiment was well captured by the weakening trend in the rand exchange rate against major currencies, while the prices of some commodities reflected both the negative sentiment and expectation of smaller growth in company profits.
Household liabilities also continued their increasing trend albeit at a much slower pace. Although the pace of household liabilities growth slowed, household debt service costs increased from 9.8% in Q4 2012 to 10.9% in Q1 2013 on a QoQSAA basis – notwithstanding the fact that the prime rate remained unchanged. This can be ascribed to higher average interest rates charged by banks (especially on non-mortgage and non-secured debt types) and the growth in household liabilities. The ratio of household assets to household liabilities remained unchanged at 5.2 during Q1 2013, while the ratio of household net wealth to disposable income increased slightly to 317.2 in Q1 2013 from 316.6 in Q4 2012.
International economy
International economic growth had a mixed impact on South African household wealth during Q1 2013.In countries such as the United States of America (USA), the United Kingdom (UK), Germany and Japan economic growth accelerated from the pace registered in Q4 2012, which should have supported South African household wealth. However, economic growth slowed in China, while it contracted in the European Union (EU) and remained unchanged in Australia. As the EU and China are South Africa’s largest trading partners, their weak economic growth performances had a dampening impact on South Africa’s exports.
On the currency front, the US dollar continued to strengthen during Q1 2013 gaining more than 3% against the Euro. Since January 2013, the stronger dollar had a downward strengthening impact on commodityprices such as gold. The Euro area and China underperformed; unfortunately for South Africa, these two regions are the country’s largest trading partners, thereby negatively affecting exports and the performance of domestic financial markets.
South African economy
During Q1 2013 production in the South African economy was hampered by slow international demand as described above, structural deficiencies such as the shortage of electricity, and many self-inflicted injuries including wage-related labour strikes. These factors ensured that production growth remained below the country’s economic growth potential in Q1 2013.
According to Statistics South Africa, the pace of economic growth slowed markedly from 2.1% in Q4 2012 to 0.9% in Q1 2013.Production growth was hampered by the manufacturing sector that contracted by 7.9% compared to Q4 2012 on a QoQSAA basis. However, the economic growth statistics should be treated with caution as Q1 2013 was characterised by additional public holidays normally occurring in Q2 2013. It can therefore be expected that economic growth will rebound sharply in Q2 2013 as a result of additional production days
Consumer price inflation (CPI) increased from 5.7% in Q4 2012 to 5.9% at the end of Q1 2013. Strong increases in the petrol price (16.4% on a YoY basis), medical scheme contributions (10.5%) and the price of education (9%) contributed to the increase in the CPI.
The exchange rate lost further ground against major currencies during Q1 2013, continuing its weakening trend that started in Q2 2012.
Job growth was particularly slow in Q1 2013 with only 40 000 net new jobs created. However, new job seekers far outweighed the number of jobs created contributing to an increase in the unemployment rate. The number of unemployed increased by 100 000 persons in Q1 2013.
