South African households entered the final months of 2024 on a stronger financial footing, with economists predicting further improvements into 2025. According to the South African Reserve Bank’s (SARB) quarterly bulletin for Q2 2024, household consumption expenditure (HCE) grew, reversing the earlier contraction from Q1. As HCE constitutes two-thirds of the country’s GDP, its rise signals better household financial health, particularly in debt repayment and disposable income. The growth was supported by a 0.9% increase in real personal disposable income (PDI), up from a 0.1% contraction in Q1.

Nedbank economists highlighted that real compensation of employees rose by 0.1% following a stronger 1.5% increase in Q1. Other income also recovered, growing by 3% after a steep decline earlier in the year. These factors drove household spending, with increases seen across semi-durable goods, services, and both durable and non-durable goods.

Household debt declined as a percentage of nominal disposable income, falling to 62.2% from 63% in Q1, while debt servicing costs eased to 9.1%. Additionally, net wealth rose to 393% of PDI, buoyed by a rebound in share prices, though house price growth remained modest.

However, the personal savings rate worsened, dipping to -1.3% from -0.8% in Q1. Despite this, economists remain optimistic, forecasting further income growth and reduced borrowing costs as inflation stabilises and interest rates fall. The SARB cut rates in September, with more reductions expected in 2025.