Consumer stress starting to show in the numbers

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The most worrying of the figures was that of total household consumption‚ which slowed to 1.8% (quarter-on-quarter‚ seasonally adjusted and annualised) - the slowest rate of growth since the global financial crisis.

Within total household consumption‚ growth in consumer spending on non-durable goods (essentially food and drink) went negative for the first time since early 2009.

Durable goods spend drops

Growth in spending on durable goods also slowed markedly‚ from 6.9% quarter on quarter‚ seasonally adjusted in the fourth quarter of last year‚ to a miserable 2.8% quarter on quarter for the first three months of this year.

What is especially worrying about the slower increase in spending on durable goods is that this was despite an increase in household wealth and a decrease in the ratio of household debt to disposable income (albeit marginal).

Although annual retail sales figures released on the same day the quarterly bulletin surprised on the upside by increasing 1.8% year on year in April‚ compared to the consensus expectation of 1.6%‚ the sector is clearly showing the pinch that consumers are feeling.

So far this year‚ only a handful of retailers have managed to beat the market‚ while the majority have floundered as their customers come to terms with rising debt levels and falling disposable income.

It is probably safe to assume that in an environment or rising interest rates - and with already high levels of household debt - most people will do what they can to put off the purchase of a new phone or dishwasher as long as they can.

Food purchases

However‚ the same cannot be said for food purchases.

Consumers can certainly change their spending patterns to some extent by doing monthly shops instead of weekly or daily shops‚ substituting their usual brands for cheaper brands‚ or changing their usual retailer entirely. But they still need to buy food.

For consumers in lower income brackets‚ for whom food comprises a higher percentage of their total spend‚ this is particularly difficult.

Investec Asset Management economist Nazmeera Moola says while there has been some change in spending patterns‚ it has become clear that the lower end of the market is under more strain than the middle and the upper end.

"In recent trading periods Pick n Pay and Shoprite have seen their volumes contract on a like-for-like basis‚ but at the same time Woolies is showing strong growth in food."

The real difficulty for retailers over the next few years will be to reconcile the type of growth they experienced between 2009 and last year with South African consumers' "new normal"‚ which has manifested since mid-2013.

Wage growth slowdown

According to Moola a significant part of this can be attributed to the very necessary slowdown in growth in public sector wages.

Between 2009 and early last year the pubic sector wage bill - the number of workers employed by the state multiplied by their wages - increased by 14% a year on average. During the same period inflation averaged 5.5% annually.

The result was a huge increase in discretionary spending. At the same time‚ higher wages meant that consumers who may previously have been excluded from the formal credit sector could now access bank loans‚ while those who already carried some debt were able to apply for even more.

It was on this heady mix of higher wages‚ low inflation and increasing credit extension that South African retailers thrived‚ returning the kind of profits that were both astonishing and - in hindsight - somewhat unrealistic.

But now‚ as wage growth has started to fall‚ rising inflation is starting to eat away at real income and credit extension is slowing‚ particularly in the unsecured lending sector. Consumers are having to make hard choices.

Light at the end of the tunnel

The situation‚ however‚ is not all doom and gloom.

For those dependent on the financial wellbeing of lower income households‚ there may be light at the end of the tunnel sooner than for those serving the middle and upper income brackets.

Moola said that due to the shorter loan periods offered by unsecured lenders‚ their balance sheets will repair sooner than will those of banks that have allowed clients to extended their bonds to finance consumption.

Further‚ when (dare I say "if"?) the economy starts to recover again and debt returns to more manageable levels‚ consumers will be itching to replace that old phone they've been hanging onto‚ or that broken‚ mouldy dishwasher.