Consumer confidence rebounds

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Filomena Scalise

Cape Town - Consumer confidence in economic prospects increased 10 points during the second quarter of 2014.

The FNB/BER consumer confidence index (CCI) showed a rebound from -6 points during the first quarter of the year to +4 points.

This was the highest rating since the third quarter of 2011 but still marginally below the long-term average reading of +5 points since 1994.

“The increase in consumer confidence during the second quarter of 2014 is encouraging and points to some resilience in the consumer sector in the face of considerable headwinds,” FNB chief economist Sizwe Nxedlana said.

In the second quarter of this year, all three sub-indices of the CCI improved notably.

However, only the two forward-looking indicators were in the positive, namely the economic outlook sub-index at +5 points and the household financial position index at +17.

The durable goods index stood at -10 points, suggesting most consumers still did not consider it a good time to purchase durable goods.

Nxedlana said a number of factors may have bolstered consumer sentiment in the second quarter.

These were a short-lived appreciation in the rand exchange rate, a 37 cents decline in the petrol price between April and June, and unchanged interest rates following the 50 basis point hike by the SA Reserve Bank in January.

Some consumers may also have been heartened by the conclusion of national general elections on May 7.

“Should the economy and household financial positions fail to improve in line with consumers' relatively more optimistic expectations, the second quarter rebound in the CCI may well turn out to be an overshoot,” said Nxedlana.

He said consumer confidence may retract as the political excitement waned and “economic realities” sunk in.

High fuel prices, rising food inflation, industrial action, unemployment, and higher interest rates were expected to prevent improved growth in real consumer spending.

These changes would especially affect confidence levels of low- and middle-income earners.

Confidence levels of high-income households (earning more than R7000 a month) remained higher than those of low-income households in the latest CCI.

Nxedlana said the financial positions of high-income homes were bolstered by resilient wage growth, record high share prices on the Johannesburg Stock Exchange, and a recovery in house prices. - Sapa


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