Out­look shock for 12th quar­ter

Con­fi­dence still be­low zero

The Star Early Edition - - BUSINESSREPORT - Ka­belo Khu­malo

CON­SUMER con­fi­dence fell to its long­est streak in more 30 years af­ter reach­ing be­low zero for 12 con­sec­u­tive quar­ters in the sec­ond quar­ter of the year.

Data re­leased by the FNB/ Bu­reau for Eco­nomic Re­search (BER) yes­ter­day showed that low con­sumer con­fi­dence in South Africa had reached its long­est streak since 1982.

FNB/BER at­trib­uted the con­trac­tion to con­fi­dence shock in the wake of the sov­er­eign credit down­grades fol­low­ing the cabi­net reshuf­fle at the end of March, and news that the econ­omy had en­tered a re­ces­sion.

The FNB/BER Con­sumer Con­fi­dence In­dex (CCI) fell to -9 in the pe­riod un­der re­view from -5 in the first quar­ter of the year. How­ever, it re­mained above the low of -15 reg­is­tered in the sec­ond quar­ter of 2015.

Ja­son Muscat, a se­nior FNB eco­nomic an­a­lyst, said that de­spite the re­cent de­cel­er­a­tion in food in­fla­tion, food prices re­mained high.

He said prices would con­tinue to hit the real pur­chas­ing power of con­sumers, par­tic­u­larly for low-in­come house­holds.

“Fur­ther­more, per capita real dis­pos­able in­come is set to de­te­ri­o­rate fur­ther on the back of ex­ceed­ingly poor eco­nomic growth, lit­tle to no job cre­ation, and sub­stan­tial in­creases in per­sonal in­come taxes for mid­dle and high-in­come earn­ers,” Muscat said.

“In ad­di­tion, ex­traor­di­nar­ily weak busi­ness con­fi­dence lev­els – cur­rently at the low­est level since 2009 – will keep a firm lid on house­hold credit ex­ten­sion in com­ing months.

“Bar a swift, con­fi­dence-in­spir­ing change to South Africa’s cur­rent po­lit­i­cal land­scape, con­sumer spend­ing is likely to re­main de­pressed dur­ing the re­main­der of 2017.”

Last month, data from Rand Mer­chant Bank and BER in­di­cated that busi­ness con­fi­dence in the sec­ond quar­ter of the year slumped to lev­els last seen in 2009, largely driven down by per­sis­tent weak busi­ness ac­tiv­ity.

Macroe­co­nomic sta­tis­tics web­site Trad­ing Eco­nom­ics said con­fi­dence in South Africa av­er­aged 1.29 from 1982 un­til last year, reach­ing a high of 23 in the first quar­ter of 2007 and a record low of -33 in the sec­ond quar­ter of 1985.

In­vestec econ­o­mist Kamilla Kaplan said con­sumers’ abil­ity to spend had been re­stricted by weak in­come growth, higher taxes, ris­ing un­em­ploy­ment and muted rates of credit

What the FNB/BER CCI fell to in the sec­ond quar­ter

ex­tended to house­holds.

“Al­though CPI in­fla­tion is ex­pected to be more be­nign in 2017, the favourable ef­fect on dis­pos­able in­come is likely to be coun­tered by tighter fis­cal pol­icy, if fis­cal con­sol­i­da­tion re­mains a pri­or­ity.

“As such, house­hold con­sump­tion ex­pen­di­ture growth is pro­jected to in­crease at a mod­est 1 per­cent year-onyear this year, com­pared with 0.8 per­cent year-on-year growth in 2016,” Kaplan said.

The CCI’s eco­nomic out­look sub-in­dex also fell, from -1 to -22, a read­ing con­sis­tent with that at the end of last year, while the house­hold fi­nan­cial out­look sub-in­dex edged up from +3 in the first quar­ter to +6 in the sec­ond quar­ter.

The durable goods sub-in­dex moved from -13 in the fourth quar­ter last year to -12 in the sec­ond quar­ter this year.

Mo­men­tum In­vest­ments econ­o­mist San­isha Packirisamy said the gap in con­fi­dence be­tween low and high earn­ers had nar­rowed from a record 23 points in the first quar­ter to 8 points in the sec­ond quar­ter this year.

“Sub­dued lev­els of con­sumer con­fi­dence per­sisted for those earn­ing less than R2 999 a month, while con­fi­dence swung into neg­a­tive ter­ri­tory for those who earn in ex­cess of R14 000 a month, from 5 in­dex points in the first quar­ter to -8 in the sec­ond quar­ter,” Packirisamy added.

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