SA consumer confidence needs a boost
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.”
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.”