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DOWN: Consumer confidence indicator registers a collapse

Home Business Management Finance & Investment DOWN: Consumer confidence indicator registers a collapse

HAVING recovered from -20 to -8 index points during the fourth quarter of 2022, the FNB/BER Consumer Confidence Index (CCI) plunged to -23 index points during the first quarter of 2023.

The latest reading is broadly in line with the extraordinarily weak consumer confidence level recorded during the third quarter of 2020 (also -23, during a time of level 3 Covid restrictions, alcohol bans, school closures and curfews, as well as the second quarter of 2022 (-25) when deadly floods devastated parts of KwaZulu-Natal and the economic ramifications of the Ukrainian war started to manifest.

The reading of -23 is the third lowest CCI reading on record since 1994 and indicative of extreme concern among consumers about South Africa’s economic prospects and their household finances.

FNB chief economist, Mamello Matikinca-Ngwenya said that “The alarming increase in power outages since December and the concomitant deterioration in South Africa’s economic prospects no doubt rocked consumer sentiment during the first quarter. Spiralling food prices, another interest rate hike and a sharp depreciation in the rand exchange rate likely added insult to injury. However, further job creation in the still-recovering services sector may have softened the blow to low- and middle-income confidence.”

The big drop in the FNB/BER Consumer Confidence Index mirrors the substantial deterioration in retailer sentiment during the first quarter (with the BER’s retailer confidence index contracting from 42 to 34 index points, the weakest level since 2020Q2).

“The about-turn in consumer confidence points to a marked decline in consumers’ willingness to spend and foreshadows a significant slowdown in real consumer spending growth relative to the surprisingly strong rate recorded during the fourth quarter. The fact that high-income confidence declined the most is doubly alarming for the outlook for household expenditure, as affluent consumers also have the greatest spending power,” said Matikinca-Ngwenya.

With an increasing number of high-income households now investing (at considerable cost) in solar power and other backup power systems, these households will in all likelihood need to slash their discretionary spending to balance their budgets.

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