JOHANNESBURG - Consumer confidence in South Africa surged to an all-time high in the first quarter of the year, indicating the willingness of consumers to spend more, following the election of Cyril Ramaphosa as head of state.
The First National Bank (FNB)/Bureau for Economic Research (BER) consumer confidence sentiment index (CCI) raced to 26 points in the first quarter of 2018 from -8 points in last year’s fourth quarter.
The increase is the largest single quarter improvement since BER started publishing a composite index in 1982. It also dwarfed the previous record high of 23 index points reached in the first quarter of 2007.
FNB chief economist Mamello MatikincaCRT said the index indicated that most consumers were more optimistic about the outlook for the South African economy and their household finances.
“While the VAT hike to 15 percent would have weighed on consumer sentiment, the zero rating of basic food items such as maize meal‚ brown bread‚ dried beans and rice will mitigate the impact of this tax increase on low-income households,” Matikinca said.
“The extraordinary improvement in consumer sentiment during the first quarter of 2018 can largely be ascribed to the change in the country's leadership, which triggered many positive economic developments.”
The BER said consumer confidence surged across all income and population groups during the first quarter of the year.
It said sentiment among those who take home R14 000-plus a month reached new record highs of 31 points while those who earn R3 000 a month improved their confidence to levels last seen in 1995.
FNB and BER said index among white consumers reached a level last seen in 1988, while confidence among their black counterparts also hit 34 index points, the second highest level since the all-time high of 38 points after the 1994-election.
Statistics South Africa said this month that retail sales, which best indicate consumer sentiment, increased 4.9 percent year-on-year in February and above market expectations of a 2.8 percent gain.
New car sales have also soared in the first three months of the year.
Citadel chief economist Maarten Ackerman said the buoyant mood among consumers bodes well for the future outlook for the economy.
“As consumer confidence acts as a leading indicator to the economy, the recent surge in consumer confidence in South Africa supports the idea that our economic growth in 2018 will likely be better than initially expected,” Ackerman said.
The BER, however, cautioned of a risk that the CCI overshot of the positive sentiment, charging that there could be a negative correction during the second quarter. All three sub-indices of the CCI saw substantial improvements.
The index, which gauges consumers’ perception of the economy in the next 12 months outlook, jumped from -2 points in the last quarter of last year to 34 points in the quarter under review.
The consumers' assessment of their own financial position surged to 31 points from 2 points previously.
The number of individuals deeming it appropriate to purchase durable goods presently improved to 14 points from -24 points in the prior quarter.Lara Hodes, an economist at Investec said: “The waning of policy and political uncertainty following Ramaphosa’s election as president of the ANC and subsequently the Republic, together with the avoidance of a sovereign rating downgrade by Moody’s rating agency and a budget more orientated towards fiscal consolidation, boosted the outcome.”