Consumers red-card luxuries as inflation hits

South Africans are already behaving as if the country is in a recession.

Consumers are spending less on food than a year ago and are not keen to buy durable goods such as fridges and TV sets, according to a Reserve Bank report.

Spending on non-durable goods such as food, beverages and tobacco was 0.4% less than a year ago and is now at its lowest level since 2009, when the financial crisis dragged South Africa into three consecutive quarters of negative growth.

The growth in swiping and signing for durable goods declined from 6.9% at the end of last year to 2.8% at the end of March this year - the slowest in five years.

After hefty price increases, households bumped up their spending on fuel and power, leaving less for other necessities. This means they either bought less or downgraded to cheaper goods.

The economy contracted by 0.6% in the first quarter of this year, with some analysts suggesting South Africa was headed for a recession - two consecutive quarters of negative economic growth.

The Consumer Price Index, released by Statistics SA yesterday, shows that inflation rose to 6.6% in May - the highest in five years.

This is above the Reserve Bank's target of 3%-6% for two consecutive months, making an interest rate hike next month more likely.

Nedbank's economists said the inflation outlook remained poor in the short term. "The Reserve Bank faces the dilemma of striking a balance between weak growth and rising inflation," they said.

Additional reporting by Roxanne Henderson