Global Courant
Picture: Business Tech Africa
Further boosting July’s growth, the average take-home pay tracked in the BankservAfrica Take-home Pay Index (BTPI) rose again in August 2023, surpassing the levels reflected last year. The latest data also reflects some good news for the local job market in Q3.
“The average nominal pay for August reached R15 578, representing a 5.8% increase on the R14 717 recorded in August 2022,” says Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements. “The August figure was also higher than July’s R15 525.”
After stabilising in Q2, nominal salaries improved in July and August despite the unchanged economic narrative. This is as some industries have become progressively more resilient to the effects of load shedding. Providing a snapshot of operating conditions in the private sector, the S&P Global South Africa Purchasing Managers’ Index (PMI®) registered a reading above the 50.0 neutral mark in August for the first time in six months, signalling somewhat better conditions in the private sector. If sustained, this could be a supportive factor for employment and remuneration prospects.
Compared to a year ago, the average real take-home pay increased by 0.9%, only the second positive annual growth rate since September 2021. However, the real take-home pay at R14 284 in August 2023 is marginally lower than July’s R14 346.
“While the somewhat higher levels of real take-home pay in the past two months are heartening, it has partly been driven by a notable moderation in consumer inflation,” says Elize Kruger, Independent Economist. Headline consumer inflation moderated from 7.1% y/y in March to 4.7% y/y in July and ticked up marginally to 4.8% in August, reducing the extent of the erosion of purchasing power that households have had to deal with. Though back into the South African Reserve Bank’s 3-6% target band for three consecutive months, an unwelcome U-turn is on the cards.
With estimates of petrol and diesel price increases at around R1.00/l and R1.50/l in early October, the cumulative increases over the most recent three months would be about R3/l for petrol and a notable R5/l for diesel. According to Kruger, these increases will no doubt push headline inflation into a range of 5.5% to 5.9% for the next few months. Still, consumer inflation is forecast to average at 6.0% in 2023 compared to a 13-year high of 6.9% in 2022 (2009: 7.1%) and should then moderate further to average around 5.2% in 2024.
While the interest rate cycle has probably reached its plateau, the South African Reserve Bank is aware of the upside inflation risks posed by the renewed rand depreciation and higher fuel prices, among others. “This will result in interest rates remaining elevated for some more months, with all other challenges remaining. With household finances already under severe pressure, this scenario remains negative for consumer spending and confidence levels,” says Kruger.
The BankservAfrica data adjusted for weekly payments, suggests a slight improvement in the job market in Q3. According to the BankservAfrica sample, about 187 500 more salaries were paid in July and August, almost offsetting the Q2 losses of 198 000, but also confirming the sideways trend in number of salaries paid so far in 2023. “With the economic realities largely unchanged into the second half of the year, the job market is likely to remain lacklustre in the remainder of 2023,” says Kruger.
The BankservAfrica Private Pensions Index (BPPI) slipped marginally in nominal and real terms during August but remains in positive territory on an annual basis.
“The average nominal private pension moved to R10 741 in August compared to the previous month’s R10 983, but still 6.2% higher than one year earlier,” says Naidoo. In real terms, the average private pension in August 2023 came to R9 773, 1.3% higher compared to a year earlier, signalling that the purchasing power of pensioners, represented in the BankservAfrica database, has held up despite the high inflation environment.
Both take-home pay and private pensions above year-ago levels in August
Following the notable uptick in July, the average nominal take-home pay, as tracked in the BankservAfrica Take- home Pay Index (BTPI), increased further to R15 578 (R14 717 in August 2022), marginally higher than in July (R15 525) and 5.8% higher than a year earlier. After having stabilised in Q2, nominal salaries increased in July and August despite the economic narrative that has largely remained unchanged. Encouragingly, indications that some industries have become progressively more resilient to the effects of load shedding, as companies reduce their energy dependence on the embattled Eskom, has been an underlying positive development in recent months. The somewhat better performance of the S&P Global South Africa Purchasing Managers’ IndexTM (PMI®) – a composite gauge designed to give a single-snapshot of operating conditions in the private sector economy, is testimony to that, with a reading above the 50.0 neutral mark in August for the first time in six months. At 51.0 (the highest in a year), up from 48.2 in July, the index signalled a modest improvement in private sector operating conditions in August. Somewhat better conditions in the private sector, if sustained, could be a supportive factor for employment and remuneration prospects.
Graph 1: Nominal BankservAfrica Take-home Pay Index
Sources: BankservAfricaCompared to a year ago, the average real take-home pay increased by 0.9%, only the second positive annual growth rate since September 2021. However, the real take-home pay at R14 284 in August 2023 is marginally lower than July’s R14 346. While the somewhat higher levels of real take-home pay in the past two months are heartening, it has partly been driven by a notable moderation in consumer inflation. Headline consumer inflation moderated from 7.1% y/y in March to 4.7% y/y in July and ticked up marginally to 4.8% in August, reducing the extent of the erosion of purchasing power that households have had to deal with in recent months. While back into the South African Reserve Bank’s 3-6% target band for three consecutive months, an unwelcome U-turn is on the cards given the sharp fuel price increases in early September. With the forecast for petrol and diesel price increases are around R1.00/l and R1.50/l in early October, respectively, the cumulative increases over the most recent three months would be about R3/l for petrol and a notable R5/l for diesel. These increases will no doubt push headline inflation into a range of 5.5% to 5.9% for the next few months. Still, consumer inflation is forecast to average at 6.0% in 2023 compared to a 13-year high of 6.9% in 2022 (2009: 7.1%) and should then moderate further to average around 5.2% in 2024. While the interest rate cycle has probably reached its plateau, the South African Reserve Bank is acutely aware of the upside inflation risks posed by the renewed rand depreciation and higher fuel prices, among others. This will result in interest rates remaining elevated for some more months, with all other challenges remaining. With household finances already under severe pressure, this scenario remains negative for the spending ability and confidence levels of consumers.
In some good news, the BankservAfrica data adjusted for weekly payments, suggests a tentative pick up in the job market in Q3. Although less salaries were paid into the bank accounts of South Africans in Q2 (according to the BankservAfrica sample), about 187 500 more salaries were paid in July and August (cumulatively), almost offsetting the Q2 losses (198 000), but also confirming the mostly sideways trend in number of salaries paid so far in 2023 – see graph 2. With the economic realities largely unchanged into the second half of the year, the job market is likely to remain lacklustre in the remainder of 2023.
Graph 2: Number of salaries paid (adjusted for weekly payments)
Source: BankservAfricaAverage private pensions higher than year ago levels
The BankservAfrica Private Pensions Index (BPPI) slipped marginally in nominal and real terms during August but remains in positive territory on an annual basis. The average nominal private pension slipped to R10 741 in August compared to the previous month’s R10 983, but still a healthy 6.2% higher than one year earlier. In real terms, the average private pension in August 2023 came to R9 773, 1.3% higher compared to a year earlier, signalling that the purchasing power of pensioners represented in the BankservAfrica database have largely been preserved amid the high inflation environment – see graph 3. The average nominal pension payment represented 69% of the average take-home pay in August 2023. The value of total take-home pay and private pension payments (less than R100K per month) processed by BankservAfrica in August 2023 increased by 6.2% and 1.4% in nominal and real terms, respectively, compared to a year earlier on a non-seasonally adjusted and smoothed basis.
Graph 3: Real growth in BankservAfrica’s Take-home Pay index vs. Private Pension Index (<R100K per month)
Source: BankservAfricaTable 1: The BankservAfrica Take-home Pay and Private Pensions indices
Source: BankservAfricaSalaries and private pensions outperform August 2022
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