S.Africa's Q1 spending growth quickens to annualised 3.4% - CNBC Africa

S.Africa's Q1 spending growth quickens to annualised 3.4%

Financial

by Reuters 0

Spending in SA grew at an annualised 3.4 percent however the country's current account deficit narrowed.

Spending in South Africa grew at an annualised 3.4 percent in the first quarter of the year after rising 0.3 percent in the previous quarter, boosted by a faster pace of consumption by households, the central bank said on Tuesday.

Household expenditure was up 2.8 percent in the first quarter from 1.6 percent in final three months of 2014, while government spending fell by 1.9 percent in the period, the Reserve Bank said in its latest quarterly bulletin.

"The lower domestic price of petrol and a further moderation in food price inflation underpinned the purchasing power of the household sector," the Bank said.

It said, however, that consumer inflation appeared to have reached a lower turning point in February, with upward pressures expected to intensify due to a recent reversal in global oil prices, rising food costs, and electricity tariff hikes.

SOUTH AFRICA'S CURRENT ACCOUNT DEFICIT NARROWS, SPENDING RISES

The deficit on South Africa's current account deficit narrowed in the first quarter of the year, a central bank report showed on Tuesday, although weak exports kept the trade balance under pressure.

In its June quarterly bulletin, the Reserve Bank also said spending growth in Africa's most advanced economy accelerated in the first three months of the year, helped mainly by a faster pace of consumption by households.

The current account shortfall was smaller at 4.8 percent of GDP in Q1 compared with 5.1 percent in the last three months of 2014, as a narrower deficit on the services, income and current transfer account offset a wider trade gap.

Economists surveyed by Reuters had expected a 5 percent gap for Q1 and the rand, which has long been vulnerable to South Africa's chronically wide budget and current account deficit, pared losses after release of the quarterly bulletin.

The South African Reserve Bank said the current account shortfall was financed by portfolio inflows and other investment capital, which neutralised a net outflow in direct investment over the first quarter.

Spending in the economy grew at a faster pace of 3.4 percent from 0.3 percent in the previous quarter, led by increased consumption by households.

"The lower domestic price of petrol and a further moderation in food price inflation underpinned the purchasing power of the household sector," the Bank said.

It warned, however, that consumer inflation pressures were expected to intensify due to higher global oil prices, rising food costs, and double-digit electricity tariff hikes.

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