Things are looking up for South Africans earnings more than R20,000 per month

The FNB/BER Consumer Confidence Index (CCI) ticked up in the first quarter of 2024, driven by higher confidence levels among higher-income South Africans.

After slipping from -16 to -17 index points in the fourth quarter of 2023, the FNB/BER CCI improved to -15 in the first quarter of 2024.

Given a long-term average CCI reading of zero (since 1994), the latest reading of -15 points to a consumer that is still very much under pressure. 

However, heading into 2024, consumer sentiment is significantly higher than the -23-reading recorded during the first quarter of 2023 when stage-6 load-shedding, surging food prices and successive interest rate hikes rocked consumer confidence. 

This suggests retail sales volumes could gradually recover from the dismal performance in 2023.

The uptick in the CCI during the first quarter of 2024 can be ascribed to a recovery in the economic outlook sub-index of the CCI following a slump in the fourth quarter and a further improvement in the household financial outlook sub-index. 

Having declined from -22 to -28 in the fourth quarter, the economic outlook sub-index bounced back to -22 in the first quarter. 

The household finances sub-index, in turn, posted a third consecutive increase, rising from +3 to +8 in the first quarter. 

However, the sub-index measuring the appropriateness of the present time to buy durable goods like vehicles, furniture, household appliances and electronic goods retreated from -25 to -30, paring the gains on the overall CCI.

A breakdown of the CCI per household income group shows that an uptick in the confidence levels of high-income households drove the slight improvement in overall confidence.

High-income households refer to those who earn more than R20,000 per month. 

High-income confidence rose from -19 to -14 index points because of significant improvements in high-income consumers’ ratings of the outlook for the national economy and their own household finances.

In contrast, the confidence levels of middle-income households – those earning between R5,000 and R20,000 per month – remained unchanged at -17 index points.

The confidence of low-income households – those earning less than R5,000 per month – slipped back from -13 to -16. 

All three income groups still consider the present time highly inappropriate for purchasing durable goods. Still, high-income households turned noticeably more optimistic about their financial prospects (+13) compared to middle- (+6) and low-income (+5) households.

FNB chief economist Mamello Matikinca-Ngwenya said, “Significantly lower levels of load-shedding and a deceleration in inflation – particularly on the food price front – likely supported consumer confidence during the first quarter.” 

“However, job losses in the fourth quarter and renewed fuel price hikes in February and March probably countered some of these positive developments, particularly for low-income households.” 

She said the tightening in fiscal policy announced in the February Budget Review probably also clipped consumer confidence. 

Notably, in contrast to the other two sub-indices of the CCI, consumers’ ratings of the present time to buy durable goods deteriorated further in the first quarter. 

“Above-inflation increases in vehicle prices, a very weak rand exchange rate at the time of the CCI fieldwork and the realisation that interest rates are unlikely to be cut during the first half of 2024 probably prompted consumers to postpone their durable goods purchases,” Matikinca-Ngwenya said.

According to Statistics South Africa, vehicle prices increased 7.2% year-on-year in January – well above the CPI inflation rate of 5.3%. 

Furthermore, when the fieldwork for the CCI commenced, the rand traded at a very weak level, around R19.30/USD, likely triggering expectations of further price hikes for imported durable goods.