JOHANNESBURG – Consumer morale plummeted to the lowest levels in one year with harsh economic developments putting pressure on spending.
FNB and Stellenbosch University's Bureau of Economic Research (FNB/BER) said consumer confidence plummeted to 7 points in the third quarter from 22 points in the second – much lower than the 17 points forecast.
FNB/BER said the sentiment deteriorated across all income groups, driven by the recession in the first half of the year, rising unemployment, higher personal income taxes and VAT as well as currency depreciation and soaring fuel prices.
FNB chief economist Mamello Matikinca said the slowdown clearly indicated that the country's domestic growth had stalled and job creation was still stuck in low gear.
“While the government's plan to change the Constitution to explicitly allow for the expropriation of land without compensation probably heartens less affluent consumers, it is creating apprehension among property owners and the investment community,” Matikinca said.
”Add in negative developments in terms of the rand exchange rate, fuel prices and share prices and one can appreciate why consumers are less optimistic about economic prospects and the outlook for their household finances compared to earlier in the year.”
South Africa's economy contracted 0.7 percent quarter-on-quarter during the second quarter following a 2.6 percent quarter-on-quarter decline in the first, resulting in the first technical recession since 2009.
The rand also fell more than 20 percent to R/$14.50 in October from around R/$11.70 in March, putting pressure on the prices of imported goods in coming months.
Matikinca said the weak rand pushed petrol and diesel prices up by nearly R3 a litre in March, while illuminating paraffin also shot up 39percent, weighing heavily on low-income consumers during the third quarter.
“Low-income households spend a large proportion of their budgets on food, transport costs and paraffin,” she said. FNB/BER said despite the faltering confidence, the majority of households still expected their household finances to improve over the next 12 months, with the exception of low income-earners and the Western Cape. Annabel Bishop, Investec chief economist said: “The readings still show above-average consumer confidence, while economic growth is in contrast particularly weak.”