SA Consumer Outlook- Easing Out Of The Pandemic

Despite the low base of 2020, wage growth in 2021 was disappointing at only 3.9% y-y. Consumer spending power growth in 2021 was also weighed down by high transport costs and lower social grants, with Covid relief scaled back. A surge in long-term insurance claims, which is likely Covid-related, provided some offset. Overall, the consumer wallet grew by a modest 2.8% y-y in 2021. By contrast, retail sales growth surged by 9.2% y-y. We believe the excess retail sales growth may have been funded by reallocations from other spending items (e.g. spending on leisure items such as travel may have been redirected to retail) or by credit. Mortgage debt, for example, increased by 9.3% y-y, which is surprisingly high considering the weak job market and low consumer confidence.

For 2022, we argue that the normalisation of inbound tourism is critical to stimulating wage growth. The SA consumer market has relied on domestic consumption over the past two years, which has been supported by non-recurring Covid-relief and insurance benefits.

While we are optimistic the pandemic may fade in 2022, it could be challenging for the consumer wallet to reflect strong growth. We estimate wage increases of at least 5% and job growth above 3.5% will be required to deliver respectable wallet growth in 2022.