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Financial services company FNB says that sustained lowering of interest rates and loosening of lockdown levels are providing a significant boost to the recovery of median income and cash flow among middle-class salaried consumers who have a formal or full-time employment.
The bank has published new insights based on revenue trends among its retail and private banking clients who earn a monthly gross income of between R10,000 and R60,000.
FNB said that the financial position of the average middle-income client is now roughly on par with the levels recorded in February 2020, before the implementation of the national lockdown.
Additionally, consumer spending patterns are on the mend, with most categories like groceries and entertainment returning to normal. However, categories such as travel remain significantly lower due to the travel bans instituted during the lockdown.
In comparison, the median income among informal and self-employed consumers continues to lag behind, as a result, this income group may take longer to regain their usual median income levels.
“The lockdown has been the most difficult experience for consumers, both emotionally and financially. However, the recovery of income and the improvement of cash flow among middle-income consumers bodes well for the economy, as middle-class consumers have significant purchasing power, ”said the executive director of private banking and FNB retailer, Raj Makanjee.
“The timely adjustment of interest rates has been essential to protect consumers who are servicing debt from serious financial difficulties.
“Similarly, our cash flow relief measures have enabled our clients who earned partial or no income during lockdown levels 4 and 5 to manage the impact of this difficult period on their finances,” he said.
FNB said that the average income of consumers who are employed by SMEs (which employs fewer than 10 people) was the hardest hit during the course of the shutdown.
The bank estimates that half of the people employed by these SMEs have experienced a drop of at least 15% in average earnings. However, only one in five of employees larger companies (1,000 or more employees) experienced an average revenue drop of 15% or more.
“By having these meaningful conversations, we gain a better understanding of our customers’ situation and we have a greater understanding to help them practically free up cash flow.
“Specific spending solutions are evaluated on our clients’ credit, essentials and lifestyle expenses for each client to determine how we can best help them. Additionally, we are helping clients align their spending with the things that are important to them in order to achieve their financial goals, ”said Makanjee.
Read: South Africans are starting to spend again
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