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Johannesburg – Rising global food prices are expected to put pressure on local food prices in 2011, Frost & Sullivan's third-quarter report on South Africa's economic outlook showed on Tuesday.
Food prices have started adding some upward pressure on consumer inflation on a month-on-month basis, rising 0.5% between July and August.
On the demand side of the economy, Frost & Sullivan analyst Craig Parker expects growth in consumer spending to likely remain slow in the months ahead.
Low interest rates and inflation have been positives for consumers, but high debt and continuing job losses are factors counting against consumer recovery.
Parker said the expected slowing growth in consumption spending is on the back of lower levels of credit extension "as credit is not as freely available as in the past".
The National Credit Act (NCA) is another factor contributing to lower credit extension, as financial institutions remain strict about giving credit to consumers who do not qualify due to indebtedness, among other factors.
According to Parker, the high level of debt serves to further slow growth to household consumption.
Credit statistics reflect the challenges many consumers still experience.
National Credit Regulator figures show that of the 18.3 million credit-active consumers, only 53.1% are classified as in good standing.
"The number of consumers not in good standing continues to increase; the number with impaired records has risen by 212 000 from the first to second quarter 2010," Parker said.
Frost & Sullivan said that overall recovery is expected to take place at a slower pace, with the strong rand constraining exports.
Most economists see growth averaging between 2.8% and 3% in 2010, with the treasury pencilling in 3% growth.
High consumer debt levels combined with the difficulty of obtaining credit are expected to constrain consumer expenditure.
"High levels of foreign investment are foreseen to continue until the rand devalues against major international currencies," the report concluded.
