Outlook shock for 12th quarter

Confidence still below zero

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.