Consumer take-home pay holds steady amid inflation and economic uncertainty

Consumer take-home pay, tracked in the BankservAfrica Take-home Pay Index (BTPI), held steady in June 2025, after three months of moderation, due to the favourable inflation rate and expectations of an interest rate cut.

However, while average salaries might increase by 5% this year based on current conditions, future earnings and unemployment levels may be adversely impacted by external factors impacting on the economy, an economist has warned.

“The nominal average take-home pay of R17 310 in June 2025 declined marginally by 0.1% on May’s R17 325. However, it was still well above the R15 514 level a year earlier,” said BankservAfrica’s Head of Stakeholder Engagements Shergeran Naidoo.

He said the economic outlook had deteriorated in recent months even though the first six months of data from the index signaled that 2025 would, on average, be a good salary year.

Inflation adjusted take-home pay moderated marginally by 0.2% month-on-month to R14 804 in June, compared to R14 827 in May, but was still notably up on year-ago levels.

“The significant moderation in consumer inflation in 2024 has had a positive impact on the purchasing power of salary earners and the scenario continues into 2025, with the latest headline CPI figure at only 3% for June 2025,” said Independent Economist Elize Kruger.

After challenging years for salary earners, due to the sluggish local economy and the elevated inflation rate, 2024 turned out to be the best year since 2015, with an average real salary increase of 1.5%.

“With inflation forecast to average 3.5% in 2025 - unlike 4.4% in 2024 – and the broader industry suggesting an average salary increase above 5%, 2025 will be the second consecutive year of a real increase in earnings,” said Kruger.

She said the favourable inflation environment had created ample scope for the South Africa Reserve Bank to cut interest rates further, in addition to supporting salary earners’ consumption expenditure and softening the impact of global headwinds on the local economy.

“Carpe Diem Research Services forecasts a 25 basis percentage points cut at the Monetary Policy Committee meeting tomorrow, July 31, 2025,” said Kruger. She said this was likely to be the final cut in the current downward cycle.

She said that even though 2025 had turned out to be a volatile year so far, real consumption expenditure had held up well, which was encouraging for an economy heavily reliant on consumer spending.

“Even with confidence levels slipping in the first quarter, the level of real final consumption expenditure by households was 2.8% higher compared to a year earlier. Early indications from StatsSA indicate that the performance continued in the second quarter, with real retail sales in the first five months of the year up by 4.3%,” she said.

However, there had been downward revisions to growth prospects - locally and globally - and high levels of uncertainty, fueling low confidence and a pause on investment decisions.

“This could affect employment levels and earnings in the coming months, in an economy with an already high unemployment rate of 32.9%,” said Kruger.

Additionally, tensions between the US and South Africa, coupled with uncertainty over the tariff landscape beyond August 1, presented a growing concern for the economy and its trade outlook, she said.

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