Higher interest rates continue to squeeze the finances of most households, and this could dampen Black Friday and Christmas spending, according to Altron FinTech Household Resilience Index (AFHRI).
According to the report, 11 of the 20 constituent indicators of the AFHRI have declined year-on-year, and nine have declined since the last comparable quarter before the pandemic.
According to Altron FinTech MD Johan Gellatly, these results don’t bode well for consumers to spend excessively in the run-up to Black Friday, one of the key events in the annual retail calendar, even though November is typically marked by retailers offering massive discounts.
“Christmas may also be bleak for retailers across the board, with households now very clearly under severe strain, especially those in the lower income brackets.
According to economist Dr Roelof Botha, who compiles the index on behalf of Altron FinTech, ever since the onset of restrictive monetary policy in South Africa, the financial resilience of households has been under pressure, with a strong – and predictable – inverse correlation between higher interest rates and the AFHRI trend.
“The gains made in the post-Covid-19 recovery period have now been wiped out by the highest interest rates in 15 years, with the current real prime overdraft rate, i.e., prime minus the consumer price index (CPI), at a level of 7%, more than double the average rate that existed during the tenure of the previous Governor of the South African Reserve Bank (SARB), Gill Marcus,” said Botha.