Slow wage growth, surging electricity prices keep consumer confidence at its lowest ebb
Economy / 15 January 2020, 11:30am / Siphelele Dludla
JOHANNESBURG – Consumer confidence in South Africa remained at a two-year low during the fourth quarter of 2019 as economic uncertainty, slow wage growth and surging electricity prices prompted consumers to hold off on major spending.
The FNB/BER Consumer Confidence Index (CCI) stayed unchanged at -7 index points during the fourth quarter, having plunged from +5 index points during the second quarter to -7 during the third quarter.
This means consumer confidence remained at its lowest level since the fourth quarter of 2017, despite consumer inflation touching 3.6 percent in November, its lowest rate since February 2011.
FNB said on Tuesday that the majority of consumers still expected South Africa’s economic prospects to deteriorate over the next 12 months.
Business confidence in South Africa is already at the lowest in more than 30 years.
Senior economist at FNB, 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.
Mkhwanazi said this weak consumer confidence suggested a general pessimism among South African households, and would likely translate into lower consumption expenditure in the fourth quarter of 2019.
“Although still optimistic, consumers are increasingly becoming weary of their financial standing, and are therefore unwilling to commit to substantial financial obligations at this stage,” Mkhwanazi said.
“This consumer reticence is more prominent among high-income earners, while low-income earners were relatively neutral in their outlook.”
Mkhwanazi said the index that tracks the South African consumers economic outlook suggested that there was a general expectation that there would be a deterioration in South Africa’s economic prospects over the next 12 months.
Retail sales growth slowed to the weakest level in seven months in October but there was some optimism over Black Friday trade.
“The bottom line is that with household budgets and consumer sentiment now under pressure, consumer spending on luxury items is likely to take a further hit and consumers are likely to divert more spending towards basic necessities,” Mkhwanazi said.
FNB said the confidence gains since President Cyril Ramaphosa’s election had now been completely reversed, and South Africa’s grim economic reality has become apparent to consumers.
The economic growth has been floundering at 0.5 percent year on year since mid-2018, and is forecast to be below 1 percent for the year when the fourth quarter figures are released.
Investec chief economist Annabel Bishop said South Africa was likely to see an economic growth rate of only 0.8 percent, as a number of structural problems remain unresolved.
This comes after a growth rate of close to 0.2 percent year on year in 2019, not least due to substantial, periodic losses of electricity supply.
“Besides Eskom outages, consumers are likely also concerned about the elevation in borrowing costs,” she said.