Confidence of SA consumers sinks
SA consumer confidence plunged to its lowest level in about a year in the first quarter of 2023, the FNB/Bureau for Economic Research (BER) survey showed on Thursday.
The figures show the effects of power and cost-of-living crises, and raise questions as to whether the Reserve Bank can hike interest rates further now.
The FNB/BER consumer confidence index (CCI) plunged to -23, the lowest point since the second quarter of 2022. The -23 reading is the third lowest since 1994 and shows consumer concern about household finances and SA’s economic prospects.
The sobering figures come a week before the Bank’s monetary policy committee meeting at which it is widely expected to hike interest rates by 25 basis points, pushing the repurchase rate to 7.50%.
“These are forward looking indicators telling you that the economic prospects could be deteriorating. Consumers and businesses have been struggling with confidence for a long time. The power crises no doubt play a big part in these numbers, but it’s just one of the many factors,” said Kevin Lings, economist at Stanlib Asset Management.
Consumers expect growth to deteriorate in the next 12 months, and think it inappropriate to buy durable goods now. They are under pressure from inflation and interest rates. The ratio of household debt to disposable income is about 62.8%, according to the Bank data.
“The alarming increase in power outages since December and the concomitant deterioration in SA’s economic prospects no doubt rocked consumer sentiment during the first quarter,” said FNB chief economist Mamello Matikinca-Ngwenya.
The CCI shows confidence levels of high-income households (earning more than R20,000 a month) fell the most in the first quarter, from -10 to 31 index points. Affluent people were especially worried about the economy. The subindex fell from -18 to a historic low of -51 .
The confidence levels of middle-income households (earning R5,000 to R20,000 a month) fell from -6 to -21. The low-income confidence (earning less than R5,000 a month) slumped from -6 to -17 index points.