JOHANNESBURG – The FNB/BER Consumer Confidence Index (CCI) remained unchanged in the fourth quarter of 2019, after having plunged from +5 index points during the second quarter of 2019 to -7 during the third quarter.
Bolstered by hopes that President Ramaphosa would be quick to root out corruption and stimulate economic growth, consumer confidence held firm, trading between +2 and +5, during the first half of 2019, despite a significant further deterioration in South Africa's economic fundamentals.
According to the FNB/BER CCI report released on Tuesday, at -7 index points, consumer confidence was only one point north of the -8 recorded in the fourth quarter of 2017 – just before Ramaphosa’s election as national president – and also well below the long-run average reading for the CCI of +2 since 1994.
This strongly suggests that the confidence gains since Ramaphosa’s election have now been completely reversed and South Africa’s grim economic reality has become apparent to consumers.
“With economic growth floundering around 0.5 percent year on year since mid-2018 and the debilitating risk that Eskom’s electricity supply and financial problems pose to the domestic economy, it is not surprising that consumers are now also distressed about South Africa's economic prospects,” reads the report.
FNB senior economist Siphamandla Mkhwanazi said consumer sentiment remained depressed on the back of weak economic growth, record-high unemployment and Eskom’s ongoing electricity supply crisis and financial woes.
“Furthermore, the 2019 Medium-term Budget Policy Statement delivered by Finance Minister Tito Mboweni at the end of October highlighted a stark further deterioration in government finances, raising concerns about possible cutbacks in government employment, additional tax hikes for consumers and Moody’s lowering South Africa's only remaining investment-grade sovereign credit rating to junk status in 2020,” said Mkhwanazi.
Heightened concerns about the economy, coupled with a depreciation in the rand exchange rate and high real interest rates, are in turn dampening consumers’ appetite for and ability to afford big-ticket purchases, the report found.
The fact that the vast majority of consumers considered the fourth quarter as the inappropriate time to buy durable goods did not bode well for jewellery, furniture, household appliances, and other high-end retailers during the 2019 festive season.
Mkhwanazi said: “With household budgets and consumer confidence now both under pressure, consumers are likely to tighten the reins on their purchases of expensive luxuries. Instead, the tills of retailers in clothing, footwear, food, beverages, and other basic necessities - as well as retailers that are perceived to offer great value for money - are likely to have jingled more frequently during the 2019 festive season.”
This survey was conducted before the country was hit by the deepest power cuts yet early in December.
Consumer confidence surveys provide regular assessments of consumer attitudes and expectations and are used to evaluate economic trends and prospects. The surveys are designed to explore why changes in consumer expectations occur and how these changes influence consumer spending and saving decisions.