SA con­sumer con­fi­dence needs a boost

The Star Early Edition - - BUSINESS NEWS - Wise­man Khuzwayo

SOUTH Africa’s con­sumer con­fi­dence slipped deeper into neg­a­tive ter­ri­tory in the fourth quar­ter of last year, high­light­ing house­holds’ con­cerns about the weak econ­omy. After im­prov­ing by eight points in the third quar­ter, the con­sumer con­fi­dence in­dex fell again by seven points to -10 in­dex points in the fourth quar­ter of 2016.

Ger­rit van Rooyen, an econ­o­mist at NKC African Econ­o­mist, said that in the third quar­ter con­sumer con­fi­dence was boosted by the out­come of the lo­cal mu­nic­i­pal elec­tions, which saw op­po­si­tion par­ties win­ning key metropoli­tan mu­nic­i­pal­i­ties from the gov­ern­ing ANC, and the strength­en­ing of the rand.

“How­ever, this con­fi­dence evap­o­rated due to con­tin­ued po­lit­i­cal uncer­tainty, weak house­hold in­come growth, poor credit ex­ten­sion, soar­ing food prices and low em­ploy­ment growth. The sus­tained low con­fi­dence lev­els among con­sumers do not bode well for house­hold spend­ing prospects into 2017, as many of the fac­tors that have been driv­ing con­fi­dence lower in last quar­ter will still be preva­lent in 2017.”

Faded

Ja­son Mus­cat, a se­nior eco­nomic an­a­lyst at FNB, said: “The peace­ful, free and fair com­ple­tion of the mu­nic­i­pal elec­tions in early Au­gust, as well as the fi­nal out­come, may also have raised the con­fi­dence lev­els – or ex­pec­ta­tions for the fu­ture – of some con­sumers.

“How­ever, the elec­tion boost to con­fi­dence likely faded dur­ing the fourth quar­ter, and the eco­nomic re­al­i­ties of weak house­hold in­come growth, poor credit ex­ten­sion and soar­ing food prices once again ex­erted down­ward pres­sure dur­ing the fes­tive sea­son.”

He said a break­down of the in­dex’s sur­vey re­sults per prov­ince showed that con­fi­dence lev­els also re­treated sharply in the prov­inces where the of­fi­cial op­po­si­tion, the DA, posted the largest gains dur­ing the elec­tion quar­ter (Gaut­eng and the Eastern Cape).

Kamilla Ka­plan, an econ­o­mist at In­vestec, said pes­simism re­gard­ing eco­nomic prospects in­creased across all in­come groups.

How­ever, the largest change was ob­served across the lower in­come groups.

“The sur­vey re­port as­cribed this to the pos­si­bil­ity of the Au­gust mu­nic­i­pal ‘elec­tion boost to con­fi­dence’ fad­ing dur­ing the last quar­ter of 2016 and the fad­ing dur­ing the fourth quar­ter of 2016 and the ‘eco­nomic re­al­i­ties of weak house­hold in­come growth, poor credit ex­ten­sion and soar­ing food prices’, in­clud­ing the petrol price hikes dur­ing the last quar­ter and ad­verse do­mes­tic po­lit­i­cal com­ing back to the fore.”

She said ad­di­tional de­vel­op­ments might have served to dampen con­fi­dence de­vel­op­ments.

Mus­cat said, on a more pos­i­tive note, con­sumers’ rat­ing of the present time to buy durable goods im­proved to the high­est level (-13) since the third quar­ter of 2015, as high-in­come con­sumers be­came less pes­simistic about the ap­pro­pri­ate­ness of the present time to buy durables.

Pes­simism re­gard­ing eco­nomic prospects has in­creased across all in­come groups… par­tic­u­larly across the lower in­come groups.

“Durable goods sales vol­umes have been un­der se­vere pres­sure in re­cent months, with new car sales plung­ing by 14 per­cent year on year dur­ing the sec­ond half of 2016, and fur­ni­ture and house­hold ap­pli­ances sales vol­umes con­tract­ing by nearly 6 per­cent year on year in the third quar­ter.”

He said house­hold in­come growth and the avail­abil­ity of credit in all like­li­hood re­mained de­pressed dur­ing the fourth quar­ter.

“How­ever, sig­nif­i­cant price dis­count­ing by durable goods re­tail­ers in the face of weak sales and the in­vol­un­tary build-up of stocks likely at­tracted more cus­tomers dur­ing the fes­tive sea­son, es­pe­cially given that many cus­tomers have now al­ready post­poned their big ticket pur­chases for more than a year.”

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