Johannesburg - South Africa’s consumer confidence recovered in the third quarter of the year but was still in negative territory, a survey showed on Thursday, indicating that households remained concerned about the outlook for the economy.
The FNB consumer confidence index compiled by the Bureau for Economic Research, recovered to minus three in the third quarter after registering minus 11 in the second quarter.
But it remained well below the long-term average of four.
Jason Muscat, a senior economist at FNB, said a confluence of adverse developments over the last year and a half put many South African households under financial strain and knocked consumer confidence near record lows of minus 14 in the fourth quarter of last year.
“These include an alarming deterioration in domestic growth on the back of weak global demand, subdued commodity prices, increased political uncertainty, social unrest and the devastating impact of the widespread drought, a stagnation in public sector employment, a dramatic depreciation in the rand exchange, soaring food prices, and a slump in credit extension.”
He said the improvement in consumer sentiment during the third quarter came on the back of a marked increase in the two forward-looking sub-indices of the index - the expected performance on the South African economy in 12 months’ time and the financial prospects of households in 12 months’ time.
More confidence
“The economic outlook index jumped by 13 index points to minus four, while the expected financial position index increased by 12 index points to 16 in quarter three of 2016. In sharp contrast, the present indicator that considers whether it is currently good time to buy durable goods slumped from minus 19 to minus 21.”
Investec economist Kamilla Kaplan said the improvement stemmed predominantly from forward-looking indicators.
Kaplan said the index showed that there was less pessimism on economic prospects over the next 12 months and increased confidence with respect to the household financial position.
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“Most of this improvement was, however, derived from more confident low middle and low income households. Confidence among high and high middle income households remained depressed.”
FNB said the peaceful, free and fair completion of the municipal elections in August, as well as the final outcome, may also have bolstered confidence of some consumers.
A breakdown according to household income revealed diverging results.
The consumer confidence levels of low income consumers (earning less than R7 000 a month) jumped from minus 15 to six points, the highest level in five years, but high income confidence slumped further from minus six to minus 10 points in the third quarter.
There was also great variance in confidence across different age groups, with by far the largest improvement recorded for young people.
The sub-index for those aged 16 to 24 rocketed from minus seven to 16 during the period - the only age group with a positive consumer confidence reading.