Consumer confidence improved marginally in the fourth quarter, but remains depressed and a fourth wave of the pandemic driven by the new Omicron variant and travel bans against SA are likely to dent sentiment further.
The latest FNB/Bureau of Economic Research consumer confidence index (CCI), edged up to -9 from -10 in the previous quarter as households’ views on the economic outlook and their financial prospect improved slightly.
The latest reading of -9 puts the CCI back at the level recorded in the first quarter of 2021, as well as the last reading recorded just before the onset of the Covid-19 pandemic in SA, in the first quarter of 2020, according to a statement from FNB.
But the CCI remains well below the average long-term reading of +2, still pointing to low levels of confidence.
Household consumption accounts for about two thirds of GDP but SA’s consumers are battling rising unemployment, with joblessness now at a record high of 34.9%, putting ever-increasing pressure on household incomes.
According to the latest GDP numbers, in the third quarter of 2021 household consumption expenditure shrank 2.4%, the first contraction since the second quarter of 2020 when SA was in its first hard lockdown.
The quarter four CCI reading also comes with a caveat. Most of the fieldwork for the survey was done by the time SA scientists announced the discovery of the Omicron variant.
Omicron, the ensuing travel bans and the looming fourth coronavirus wave are likely to depress consumer confidence even further, said FNB senior economist Siphamandla Mkhwanazi.
“Whereas international travel restrictions typically affect the sentiment of affluent consumers, low- and middle-income households will arguably suffer the most in terms of job creation and income prospects if the expected bumper tourist season does not materialise and lockdown restrictions once again hammer the hospitality sector during the holidays,” said Mkhwanazi.
The consumer sentiment gauge was largely in line with business confidence, which has showed no improvement from negative terrain during the fourth quarter.
The marginal increase in the latest CCI was due to small improvements in two sub-indices — the economic outlook subcategory, which moved from -14 to -12, and the household financial position component, which moved from +12 to +14.
The durable goods sub-index, however, showed that consumers remained pessimistic about buying big-ticket durable goods such vehicles, furniture and electronic good, falling from -29 to -30.
Sentiment among high-income households, or those earning more than R20,000 a month, was unchanged at -11 in the fourth quarter.
Middle- and low-income households’ confidence levels improved with low-income households improving the most, going from -12 to -9 in quarter four. Nevertheless, all three income groups remain broadly negative.
“With confidence levels already fairly deep in negative terrain, the shift in consumer spending away from retail goods towards the services sector will likely slow, and grocery and furniture retailers will continue to win out over tourism, restaurants and entertainment services,” said Mkhwanazi.
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