Data from First National Bank (FNB) and the Bureau of Economic Research (BER) shows that consumer confidence was at an all-time high in the first three months of this year – but this shouldn’t be an incentive for you to go on a spending spree.

The FNB/BER Consumer Confidence Index (CCI) measures South Africans’ perceptions of the outlook for the economy.

The CCI combines the results of three questions posed to adults who live predominantly in urban areas. The questions concern their perceptions of how the economy is expected to perform over the next 12 months, how they assess their financial position, and whether they deem it appropriate to buy durable goods, such as furniture, appliances and electronic equipment.

All three sub-indices of the index improved substantially in the first quarter of the year.

The sub-index that measures people’s perceptions of the economic outlook jumped 36 points from –2 to 34 points. The sub-index that measures consumers’ assessment of their financial position soared to 31 points from 2 points. The number of people who deemed it appropriate to buy durable goods improved notably.

“The more positive and confident consumers are, the better the future outlook for that country’s economy, as consumer confidence supports spending, which, in turn, boosts retail sales and supports economic activity and growth,” says Maarten Ackerman, an advisory partner and chief economist at Citadel .

The CCI for high-income earners (more than R14 000 a month) and middle-income earners (between R3 000 and R14 000 a month) reached new record highs of 31 and 26, respectively. 

The CCI for low-income consumers (less than R3 000 a month) improved to levels last seen in 1995/96.

Although the improvement in consumer sentiment is welcome news for economic growth, some experts have warned that consumers should not be quick to spend money they don’t have and incur more debt.

Nomsa Motshegare, the chief executive of the National Credit Regulator (NCR), says consumers should use credit only when absolutely necessary.

“Consumers must disclose all their financial obligations to credit providers when they apply for credit so that credit providers are able to conduct a proper affordability assessment,” says Motshegare.

The NCR’s latest Consumer Credit Market Report and Credit Bureau Monitor show that consumers’ credit health is improving. The reports cover credit market information up to December 2017. The total value of new credit granted increased by 9.76% quarter-on-quarter from R123.64 billion to R135.71bn. The number of applications for credit increased by 6.18% quarter-on-quarter from 9.87 million in September 2017 to 10.48m in December 2017.

Ester Ochse, a product specialist at FNB Financial Advisory, says although inflation and interest rates are lower this year than they were at the same time last year, consumers should not go on a spending spree.

“Low inflation and improved consumer confidence do not mean you must go out and buy a new fridge which you do not need. Consumers must rather use this period to stabilise their finances,’ Ochse says.

FNB has the following advice on how to take advantage of the improved economic outlook:

• Review your personal situation and see where you can make better purchases and savings;

• Redirect surplus cash to an emergency fund; and

• Pay off short-term loans.

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