Consumer sentiment showed a slight recovery in the third quarter, after plunging to its lowest level in more than three decades in the second quarter of 2022. Confidence had tumbled due to elevated inflation, rising interest rates and escalating unemployment.
The slight recovery in confidence follows the scrapping of all remaining Covid-19 regulations and the use of the last remaining savings accumulated over the last two years to buffer household expenditure by affluent consumers.
The FNB/BER consumer confidence index (CCI) released on Thursday shows that consumer confidence clawed back five index points to reach -20 in the third quarter of 2022, after falling from -13 to -25 during the second quarter.
FNB chief economist Mamello Matikinca-Ngwenya said at -20, the index showed that consumer sentiment remained extremely depressed.
“Consumer confidence remains very low and not conducive to healthy growth in real consumer spending. The fact that high- and middle-income confidence levels remained extraordinarily depressed is especially alarming, as these affluent groups have far greater spending power than low-income households,” Matikinca-Ngwenya said.
She said the -20 CCI level signals a substantial deceleration in real consumer spending growth relative to the robust rates recorded earlier this year.
Consumer confidence surveys provide regular assessments of attitudes and expectations and are used to evaluate economic trends. The surveys are designed to explore why changes in consumer expectations occur and how these changes influence spending and saving decisions.
A low level of confidence indicates that consumers are concerned about the future and that they may be worried about job security, pay raises and bonuses.
When there's high confidence, consumers tend to incur debt and increase spending on discretionary items, such as furniture, household equipment, motor vehicles, clothing and footwear — often financed on credit.
Data shows all three sub-indices of the index recovered some lost ground during the third quarter.
The economic outlook subindex saw the greatest improvement from -39 to -31 but this came from an extraordinarily weak level.
The household financial prospects sub-index edged up from -5 to -2, while the index measuring the appropriateness of the present time to buy durable goods rebounded from -32 back to -28.
Data also shows that the confidence levels of high-income households, those earning more than R20,000 per month, and middle-income households (those earning between R2,500 and R20,000 per month), only improved slightly following large declines during the second quarter.
Surprisingly, low-income confidence consumers, those earning less than R2,500 per month, rebounded strongly, from -16 to -3 index points — the highest reading since the first quarter of 2021.
Matikinca-Ngwenya said the increase in the number of people who qualify for the SRD grant, as well as the noticeable improvement in employment, especially in the services sector, bolstered the confidence levels of less affluent consumers.
“Confidence levels of less affluent households recovered smartly during the third quarter of 2022 despite further sharp increases in food and transport costs."
“In contrast, the 75-basis point hike in the prime interest rate in July weighed on the disposable income and confidence levels of indebted middle- and high-income consumers,” she said.
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