Higher levels of consumer spending are critical for economic growth as spending stimulates demand for goods and services, leading to increased production. Higher production levels boost business development and investment and create job opportunities. South Africa’s economy experienced low growth over the past decade. One of the leading causes of low levels of economic growth is a lack of robust consumer spending. In macroeconomic terminology, consumer spending is one of the components of aggregate demand-side models.

As the Keynesian model implies, other components of aggregate demand include government spending, domestic investment and net exports. All these components together equal a country’s total gross domestic product or GDP. Consumer spending is by far the most significant contributor of all the GDP components. In most countries, its contributions to GDP are from 55-70%. Click here to read the full article