Skip to main content

Disposable salaries unlikely to beat inflation in 2016

| Economic factors

Salaries in South Africa have declined over a long period of time for the first time since the start of the monthly BankservAfrica Disposable Salary Index (BDSI).

This supports the growing sentiment that salaries are unlikely to beat inflation in 2016, according to Dr Caroline Belrose, head of knowledge and risk services at BankservAfrica.

"It is the first time since the great recession in 2008/09 that we have had four months in a row of actual real salary decline. That tells me retail sales will remain under pressure," Mike Schüssler, chief economist at Economists dotcoza, told Fin24 on Thursday.

"It is very clear that total salaries are not growing at the moment. I also don't think we have much hope for big bonuses in December or March - We are in a period of subdued consumer spending." 

The average disposable salary declined in real terms on a year-on-year basis by 0.3% in the first nine months of 2016, the BDSI September data - released on Thursday - shows.

The median disposable salary declined by 0.7% in the first nine months of 2016 compared to the same period in 2015. This data supports Statistics SA’s declining retail sales figures in August where big ticket items, such as passenger cars, did not feature.

According to the BDSI report, it comes as no surprise that retail sales are under pressure. The average salary trend reflects slowing real increases. Although real average disposable salaries rose by 4% over a four year period, these increases are still declining in nature.

"Salaried individuals have for some time been paying off their debts and are subsequently purchasing fewer durable goods such as cars and houses. As a result, South African retail sales, as indicated by Statistics SA, were barely positive in August," the report states.

"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."
According to Schüssler, the current trends suggest that any disposable salary increases for the remaining 2016 months will not be strong due to the higher rate of inflation and weak economic growth.

Rising pension payment trend continues

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, according to Belrose.  

“As indicated in August’s BPPI, average pensions are the only income to be growing in real terms and helping to keep retail sales in positive territory,” she explains.

However, 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. This is a truly astounding trend analysed by the BankservAfrica payment system,” said Schüssler.

Since January 2013, when the BPPI data analysis began, the typical pensioner experienced real increases of 15.2%. The typical pension value has increased from 38.5% in January 2013 to 43.5% in September 2016 when compared to the typical salary.

“BankservAfrica’s BPPI data reveals a complete reversal to when salary percentage increases were in the lead,” said Schüssler.

Since January 2015, there has not been a month where the increase in the typical pension has been less than the typical salary, the BPPI shows. The average income from pension fund investments is described as having been astounding over the last few years.

“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,” said Schüssler.

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. It is estimated that approximately 3.5% more people receiving a private pension than at the start of 2013.

Pin It

Related Articles

Petrol price earmarked for another hike in May

By: Siphelele Dludla – IOL Business Report THE Automobile Association (AA) has warned of another petrol price hike in May that will push the cost of living even higher for financially-constrained consumers, as inflation also remained sticky above...

Petrol price hike on Wednesday, but some diesel...

By: News24   Petrol will be hiked on Wednesday (03/04/2024), while wholesale diesel prices are mixed.  

SPAR shares tips on how to lighten the financia...

For many, Easter is a time of celebration and tradition, marked by gatherings with loved ones and delicious meals. However, the financial strain brought on by the increased cost of living may require families to adjust their usual celebrations, wh...

Reprieve for consumers at till as prices tick m...

By: Given Majola - IOL Business Consumers got a reprieve at the till this month as the cost of the average household food basket showed a marginal increase.

SA consumers feel the big squeeze: 99% have cha...

According to NIQ, 44% of South African consumers feel they are in a worse financial position this year compared to a year ago.