Consumers are less financially vulnerable this quarter
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LOCAL consumers saw an upliftment in their financial status In the first quarter of this year, owing largely to recovery in income generation of the middle- and higher- income groups.
According to the Momentum-Unisa Consumer Financial Vulnerability Index (CFVI) released yesterday, the index improved from a low point of 35.4 points recorded in the second quarter of 2020, to 49.7 points, up from the 47.5 points recorded in the last quarter of 2020.
The CFVI is compiled from the views of key informants, including researchers, bankers, insurers, retailers, government, economists and analysts who deal with consumers daily.
The main drivers of the improvement in financial stability, the CFVI noted, included a decline in income vulnerability in the first quarter of this year as consumers retained or obtained employment, lower levels of expenditure vulnerability, and a decline in savings vulnerability as people turned to disposable income rather than their nest eggs, as well as the improved ability of consumers to service their debt.
"However, notwithstanding the improvement in the CFVI and its four sub-indices, the majority of consumers are still feeling financially exposed and insecure, meaning that any small adverse event such as pay cuts can contribute to a large deterioration in the state of their personal finances," the index noted.
Consumers would still need interventions to maintain the financial stability, and maindrivers for this would be improvements in the local economy to stimulate job creation, financial discipline by limiting unnecessary expenditure and saving more, more astute financial planning, including setting attainable financial goals, and increased financial literacy, the index found.
Also suggested were additional income streams or starting their own businesses, and limiting credit uptake and repaying existing debts.
"However, consumer finances will remain volatile for some time following the initial shocks brought about by the Covid-19 pandemic and subsequent lockdown that started a year ago," it noted.
"Although improving income-earning prospects was the main driver behind consumers’ experience of less financial vulnerability, all the sub-indices of the CFVI continued to recover, with all scores being higher than those in the last quarter of 2019, except savings," it said.
A the trend witnessed in the second quarter of 2020, when the hard lockdown was implemented, saw consumers more concerned about their finances than their health due to Covid-19, which was evident again in in the first quarter of this year.
The majority of those surveyed, 30.7 percent, believed that consumers were more focused on their finances than on staying safe from coronavirus, while 26.7 percent said consumers still attached a high value to their finances, but they also attach a high value to staying safe.
The first quarter of 2021 continued to show an improvement, displaying the adaptability and possible optimism of consumers.
BUSINESS REPORT ONLINE