The measurement that gauges consumer sentiment inched up to 5 points from 2 points in the first quarter boosted by an increase in confidence from consumers in the low-income bracket. However, the index, which is compiled by the Bureau for Economic Research (BER) and FNB, was still a long way from the all-time high of 26 points reached after Cyril Ramaphosa muscled Jacob Zuma out of the Union Buildings last year.
FNB chief economist Mamello Matikinca-Ngwenya said the index showed that household budgets would remain constrained by higher personal income taxes, sharp increases in the price of fuel and electricity, and rising levels of unemployment.
“Consumers have been taking on more credit as financial pressures mount, but it is unlikely that the modest uptick in credit extension will be sufficient to underpin household consumption amid dwindling real disposable income growth,” Matikinca-Ngwenya said.
“All in all, we therefore expect a further deterioration in real consumer spending growth during 2019 from the already subdued rate of 1.8percent year-on-year recorded in 2018.”
Bank of America Merrill Lynch on Tuesday trimmed South Africa domestic consumption to 1.6percent from 1.8percent.
BER/FNB warned that it did not bode well for the index that sentiment was lifted by sentiment from the low income group, as the spending power of middle- and high-income consumers far outweighs that of low-income households.
Investec’s chief economist, Annabel Bishop, said the third-quarter reading could reflect more optimism than the previous one, given that the election took place on May 8, outside of the time period of the survey.
“Furthermore, the 2019 election aside, with a contraction in GDP likely in the first quarter, third quarter's consumer confidence could be at risk from this source. The second half of 2018 saw consumer confidence wane to 7points from 24points in the first half of 2018, influenced by the recession recorded in the first half of 2018,” Bishop said.
Meanwhile, the Experian Consumer Default Index, which tracks personal loans, increased by 8.74percent in the first quarter from 8.41percent in the last quarter to a total first-time default value of R5.9 billion.
Experian said the quarterly rise was significant, because it showed that consumers were taking on debt to fund their borrowing from the previous months.
David Coleman, the chief data officer at Experian, said that consumers’ disposable incomes had been under even more pressure in recent months. “For many, the reality is that survival in difficult economic times involves taking on more debt to service short-term needs. And in many cases, these are unsecured loans that will affect households in the long run,” said Coleman.