Picture: David Ritchie

The inauguration of Cyril Ramaphosa as president at the beginning of the year had a hugely positive impact on consumers’ financial vulnerability levels in the first quarter. 

The Momentum/Unisa Consumer Financial Vulnerability Index (CFVI) improved to 52.6 points in the first quarter of this year, from 49.3 points in the fourth quarter of last year, and from 46.9 points in the third quarter of 2017, according to a release from Momentum.

On analysing the four sub-components of the CFVI (income, expenditure, saving and debt servicing), the income index improved the most: from 48.9 points to 54.8 points between last year’s fourth quarter and this year’s first quarter. Consumers indicated that their income vulnerability had declined, because they expected to be more able to retain or obtain employment during the quarter, and that their income-earning prospects had improved.

These positive income prospects contributed to a robust improvement in the expenditure index – from 50.9 points to 54 points. 

The strongest improvement was in consumers’ ability to make normal purchases each month – this sub-index increased from 51.1 points to 58.4 points.

Although the savings index increased from 49.5 points to 51.2 points, it appears as if some savings were used to finance expenses, as the sub-index indicating their ability to save decreased to 47.7 points, from 49.4 points.

The expenditure index was also supported by the debt-servicing index, which improved from 48.3 points to 50.5 points. This trend was supported by the 25-basis-point reduction in the repo rate, as well as a slow pace in the uptake of new credit.

All four consumer financial vulnerability sub-index scores were in the “mildly exposed” territory in the first quarter of this year, compared with three of the four sub-indices being in “very exposed” territory at the end of last year.

Consumer financial vulnerability (at the micro level) is influenced by macro- and micro-economic variables. For the first quarter this year:

  • Retail sales growth was 4.8% higher compared with a year ago.
  • The number of employed grew by 1.3%. Strong employment growth occurred over this period in the the manufacturing (3.3%), construction (2.9%) and community and social services (2.6%) sectors.
  • Slower year-on-year inflation rates (4.1% versus 4.7% at the end of last year) boosted spending in many cash-strapped households.
  • Household credit extension increased by 1.3%. Mortgage advances grew by 1.2% during the quarter, which is indicative of increasing consumer confidence, giving rise to higher levels of assets held by households.
  • he rand-dollar exchange rate improved from R13.17 to the dollar in December 2017 to R11.84 in March 2018.