Average take-home pay ticked up in June, adding to the stabilisation in the past three months, signalling reduced erosion of purchasing power as consumer inflation begins to trend downwards.
BankServAfrica’s take-home pay index released on Wednesday shows take-home pay increased slightly compared with a year ago and with last month.
The index shows average nominal take-home pay for June was R14,596, more than the R14,579 in June 2022 and R14,483 the previous month.
Economist Elize Kruger said they have been noting the stabilisation in salaries since April, when inflation started to trend downward after the shock 7.1% reading in March. SA headline inflation cooled to its lowest reading in 20 months, reaching 5.4%, falling back within the Reserve Bank 3%-6% target range for the first time since April 2022.
“While not definitively evident in the data yet, the pressure on salary earners could soon [decrease] somewhat based on the notable moderation in consumer inflation,” Kruger said.
“The moderation in consumer inflation will go some way in reducing the extent of the erosion of purchasing power that households have had to deal with, especially in the past year. Current forecasts suggest that headline inflation could be at 5% in July and average about 5.2% in the second half [of 2023], which could bring more good news,” she added.
There are also indications that some industries have become more resilient to the effects of load-shedding as companies reduce their energy dependence on the embattled Eskom, an underlying positive development providing some support in an otherwise dismal story, she said.
But Kruger said while improving take-home pay is positive, the economic narrative has not changed meaningfully for the economy.
Declining sales
Domestic economic activity is still dampened by ongoing load-shedding, elevated interest rates, a lacklustre job market and low confidence.
The erosion of households’ purchasing power has also been evident in declining retail sales. Stats SA recently indicated that real retail sales for the first five months of 2023 are 1.2% below the corresponding period in 2022.
This can be seen in the average take-home pay, which despite increasing in real terms to R13,522 in June, 0.8% higher than in May, is still 5.7% lower than the R14,336 recorded in June 2022.
BankservAfrica head of stakeholder engagement Shergeran Naidoo said their data, adjusted for weekly payments, also shows that the job market remains uninspiring, moving mostly sideways.
Naidoo said due to declining salaries paid into the bank accounts of South Africans in each of the past three months according to the BankservAfrica sample, cumulative job losses of almost 200,000 were recorded in the second quarter.
“With little indication that a different economic environment will play out in the second half of 2023, the job market and salary adjustments are likely to remain lacklustre in the remainder of 2023, a scenario that could only worsen SA’s unemployment crisis.”
The BankservAfrica take-home pay index is calculated on a monthly basis by dividing the total value of salaries paid into the bank accounts of employees (excluding salaries greater than R100,000 per month) by the total number of salary payments.
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