Consumer confidence plummets to lowest since 2017
By Sunita Menon - Apr 24th, 11:24
Consumer confidence plummeted in the first quarter of 2019 to levels last seen during the death throes of Jacob Zuma's presidency.
The consumer confidence index (CCI), compiled by FNB and the Bureau for Economic Research at Stellenbosch University, fell sharply to two index points in the first quarter of 2019 from seven in the second half of 2018, suggesting that most consumers were neither optimistic nor pessimistic about the outlook for the SA economy and their own household finances.
This is in stark contrast to the first quarter of 2018 when consumer sentiment soared to a record high of 26 after President Cyril Ramaphosa took over from Zuma. However, it remains higher than the depressed levels recorded between 2015 and 2017.
Economists polled by macroeconomics website Trading Economics expected the index to fall to six points.
“The deterioration in consumer sentiment during the first quarter mirrors the drop in business confidence and points to dismal growth in consumer spending in the first half of 2019. Although the national election in May could see a transitory uptick in consumer sentiment, real after-tax household income will likely remain under pressure throughout 2019 on the back of higher personal income taxes, sharp fuel and electricity price hikes and anaemic private-sector wage growth,” FNB chief economist Mamello Matikinca-Ngwenya said.
The index looks at consumer attitudes and expectations and is used to evaluate economic trends and prospects. Respondents are asked about the expected performance of the economy, the expected financial position of households and the rating of the appropriateness of the present time to buy durable goods such as furniture, appliances and electronic equipment.
The drop was due to a substantial decline in the economic outlook sub-index of the CCI which plunged from 14 to zero, lower than the long-term average of four points.
The sub-index tracking whether consumers anticipated an improvement in their household finances over the next 12 months slipped from 15 to 13, while the sub-index tracking the present time as inappropriate to buy durable goods such as vehicles or furniture declined from -7 index points to -8.
“The shock implementation of stage 4 load shedding by Eskom during February and March no doubt had a very detrimental impact on the SA economy, and it is therefore not surprising that consumers are becoming especially concerned about our economic prospects,” Matikinca-Ngwenya said.
“Other factors that may have contributed to the deterioration in consumer confidence during the first quarter include prolonged labour strikes, the depreciation in the rand exchange rate, sharp fuel price hikes and further increases in personal income taxes announced in the February national budget,” she said.
Consumer sentiment deteriorated across all income groups but the fall among consumers who earn more than R14,000 per month was particularly severe, dropping from 13 to 3, while the confidence levels of consumers who earn between R3,000 and R14,000 per month, and those who earn less than R3,000 per month, each dropped eight index points to 2 and -9, respectively.
“Given the disproportionaly large spending power of high-income households, the significant deterioration in consumer confidence among high-income households does not bode well for the already ailing retail sector,” Matikinca-Ngwenya said.Business Live
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