Upward pressure on food, fuel and electricity prices will negatively impact all households in 2022. However, due to different spending capacities and priorities, households with different spending deciles will have a different impact, a new one shows analysis of the professional services company PwC.
The company noted that upper-middle-income groups are reevaluating their discretionary spending patterns and are “buying back” or reducing insurance and savings products, especially considering that Covid-19 vaccines have alleviated some of the disease threat. serious or death.
On the other hand, households in the low- to medium-low income categories will find it difficult to sustain their monthly basket of goods purchases. Given the rise in basic necessities, these families will need to carefully consider the affordability of other discretionary monthly expenses, including insurance products.
Low-income households – decile 1 and 2, based on Statistics South Africa’s latest consumer basket and income survey – spend more than half of their money on food and soft drinks.
This includes cereal products (bread and corn) which will cost much more in the coming months due to rising international commodity prices. In turn, higher-income households spend significantly less of their money on food.
“Households from decile 3 and up will experience direct pressure on food budgets, as well as rising electricity and transportation costs. There will also be second and third impact effects from higher tariffs for electricity and fuel impacting the costs of producing / supplying other goods and services.
“Also, once fuel prices have not been adjusted upwards due to rising fuel costs, these prices are sticky to the downside and are unlikely to decline if fuel prices moderate in the future,” he said. PwC.
Given consequently higher inflation, weaker external demand and an unreliable energy supply, PwC now expects real GDP growth rate of 2% this year (from 2.3% previously) with a downside risk. continuous.
Alongside these weaker economic outlooks there is even greater concern about the speed of the country’s job recovery, the company said.
“There is little chance for South Africa’s unemployment rate to improve (decrease) this year if local business sentiment is weighed down by these international factors. Furthermore, as economic growth returns to moderate towards 1.5% over the long term, the unemployment rate is likely to continue to rise from the current rate of 35.3%.
“A substantial and sustainable increase in economic and employment growth is possible only if South Africa can improve three key constraints of growth: electricity reliability, workforce skills and private sector investment.”