fbpx

Consumer Confidence Expected To Remain Subdued Despite Sentiment Inching Up

15 December 2020 – Consumer confidence in South Africa is expected to remain subdued despite sentiment inching up slightly in the fourth quarter amid further relaxation of Covid-19 restrictions.

The Bureau for Economic Research (BER) said yesterday that the FNB/BER Consumer Confidence Index (CCI) rose to -12 index points in the fourth quarter, from -23 in the previous period.

This was still the lowest festive season reading since 2015, and was below the average reading of 2 index points since 1994 as consumers were concerned about the future.

The index, however, has now regained most of its lost ground after crashing to a 35-year low of -33 index points at the height of the Covid-19 outbreak during the second quarter.

All three sub-indices of the CCI rose handsomely during the fourth quarter.

FNB chief economist Mamello Matikinca-Ngwenya said the further easing of restrictions and an uptick in economic activity had greatly benefited low-income households.

Matikinca-Ngwenya said low-income households and the unemployed would also have been relieved to hear of the extension of Covid-19 social relief grants.

She said that these Covid-19 measures, combined, amounted to an additional R6 billion to R7bn of disposable income for poor households per month.

Matikinca-Ngwenya said slight declines in petrol and paraffin prices may also have bolstered low-income confidence during the fourth quarter.

“The rebound in consumer confidence is good news for the broader South African economy, as household consumption accounts for roughly two-thirds of South Africa’s GDP,” Matikinca-Ngwenya said.

“However, the fact that the confidence levels of affluent consumers are still so depressed points to a more muted recovery in overall consumer spending during the fourth quarter compared to the noticeable jump witnessed in the CCI.”

The BER warned that the resurgence of Covid-19 infections and renewed restrictions could also weigh on consumer sentiment and hamper the pace of recovery in household expenditure during the first quarter of 2021. Non-durable goods sales are expected to outshine the other consumer spending categories heading into the new year, but this could come under pressure once the Covid-19 welfare payments had expired.

Old Mutual’s Izak Odendaal said that household consumption rebounded strongly but unevenly.

Odendaal said real spending on durable goods was almost back to pre-pandemic levels, while spending on non-durable goods rebounded strongly and had almost recovered earlier losses.

“However, spending on semi-durable goods, including clothing, is still well below pre-pandemic levels in real terms. Income-constrained households are putting off clothes purchases, while office workers have not had to update wardrobes as much,” Odendaal said.

“Spending on services, including restaurants, travel and entertainment, is also below pre-pandemic levels.

“The recovery seems somewhat stronger than initially expected, and there are some positive supporting factors. The big risk is the second wave of Covid-19 cases.” Source (Business Report)