CONSUMERS BECOMING MORE DESPONDENT ABOUT THEIR FINANCES

could have been worse, but “end-ofyear” factors, such as annual bonuses and pay increases, changed consumers’ perceptions for the better.

Meiring says that, in view of how poorly the economy is performing, “there is a real risk that consumers may become ‘very exposed’ during 2016”.

She says the research shows that the average score for the debt-servicing sub-index is the lowest since the index was established in 2009. It also shows that debt-servicing arrear rates have reached nearly 50 percent.

Rowan Burger, the managing executive: strategy and market development at MMI Corporate and Public Sector, says high debt results in negative savings, adversely impacting on consumers’ financial wellness.

The long-term trend of higher debtservicing vulnerability is of serious concern. While income, expenditure and savings vulnerability are mainly driven by macro-economic factors, consumers’ ability to service their debt is, in part, affected by consumer behaviour, such as a low level of financial literacy. The environment of rising interest rates is putting pressure on consumers with debt.

Macro-economic factors exacerbated consumers’ vulnerability during 2015. The factors that were on the increase in terms of their impact on consumer financial vulnerability were rising interest rates and unforeseen expenses.

Meiring says there is a clear trend of increasing financial vulnerability. This is reflected by the fact that, between the fourth quarter of 2014 and the fourth quarter of 2015, consumer expenditure vulnerability worsened from 53.5 to 53.2 (an increase of 0.65 percent in the vulnerability score), debt-servicing vulnerability worsened from 49.6 to 48.7 (a 1.73-percent increase) and income vulnerability worsened from 51.4 to 50.2 (a 2.32-percent increase).

Between the first quarter of 2012 and the fourth quarter of December 2015, the increase in consumer financial vulnerability was even more pronounced, with a 12.13-percent increase in savings vulnerability, an 11.52-percent increase in expenditure vulnerability, a 13.92-percent increase in debt-servicing vulnerability and a 12.77-percent increase in income vulnerability.

Overall, consumer financial vulnerability increased by 13.47 percent between the first quarter of 2012 and the fourth quarter of 2015.