South Africa is undergoing an intensive belt-tightening episode that is part voluntary and part involuntary, leading to significantly weaker growth in household spending.

Consumers have over the past three years consistently reported an acute lack of confidence, correctly assessing domestic economic prospects as weak.

As a result, they have signalled a voluntary defensive posture through an unwillingness to make big financial commitments such as the purchase of durable goods like houses, cars and furniture.

Tighter fiscal and monetary policy, low growth in credit extension to households, higher inflation and weak employment have also forced domestic spending downward.

On the fiscal front, the government reduced spending by R10-billion last year and raised revenue/taxes by R17-billion. Another R40-billion of spending cuts and R48-billion of revenue increases is budgeted for in the three fiscal years to March 2018. Interest rates are 200 basis points higher than in January 2014.

Related to this is very weak credit extension to households, which has slowed noticeably and is growing well below inflation and nominal household disposable income.

The result has been a decline in household debt relative to income. This ratio as of the second quarter of this year stood just above 75%, nearly 13 percentage points lower than the mid-2008 peak.

Employment is also under pressure. In the second quarter, 67000 formal jobs were lost. Compared to a year ago, formal employment is up by a mere 0.3%.

Finally, the surge in consumer price inflation has also placed households under pressure by reducing real income. Consumer inflation increased from a trough of 3.9% in February last year to a peak of 7% in February this year. It has moderated somewhat since then, coming in at 6.1% in September.

Household spending is well below its long-term average of 3.7%. Last year, real spending by households grew 1.7%. It has grown by only 0.8% in the first half of this year. The pressure is most acute in the durable goods components, which have contracted by 8% in the first half of the year.

By contrast, spending on semi-durable goods and services has been resilient, accelerating by 4.3% and 2% respectively during the first half.

Vehicle sales have contracted in 20 of the p ast 22 months. House price growth has also been slowing in recent months. Going by the FNB House Price Index, prices declined in real terms in the three months to September following a long period of muted real house-price growth.

Another indicator of pressure is the FNB estate agent survey, which shows that the average time homes stay on the market increased to 14 weeks in the third quarter from 11 weeks in the second.

In the retail sector, only retailers of household furniture and appliances have registered a decline in sales volumes in the eight months of this year for which data are available.