Economics Correspondent

THE domestic savings environment improved slightly in the second quarter as lower inflation boosted consumers disposable income and government spending fell.

The South African Savings Institute's barometer of savings conditions increased 0,57 index points to 103,33 in the second quarter, supported by higher savings by households and government.

However, trading conditions in the corporate sector were difficult during the second quarter. The subindex measuring corporate savings fell 0,83 points to 98,39.

"The deterioration in the savings environment for corporates is due to a fall in business confidence, a higher real prime overdraft rate and an increase in unit labour costs," said the institute.

Reserve Bank economist Herman Smith, who compiled the figures for the barometer, said interest rate cuts in the third quarter would probably have a positive effect on the barometer, as interest on government debt falls and household disposable income improved.

Lower inflation also improved the savings environment for consumers in the second quarter.

According to the Bank's second quarter review, the savings ratio, which is gross savings as a percentage of gross domestic product, fell to 15,5% in the second quarter from 16% in the first quarter.

Oct 31 2003 07:36:28:000AM Nasreen Seria Business Day 1st Edition