South African consumer confidence plummets

South African consumers are extremely concerned about the country’s economic prospects and their personal finances.

This was revealed by the latest FNB and Bureau of Economic Research (BER) Consumer confidence index, which dropped to a score of -23 in the first quarter of 2023.

This is down significantly from the score of -8 in the last quarter of 2022.

The index is now at the third lowest level since 1993 – equal to the confidence level at the height of the pandemic.

The consumer confidence index reflects the willingness of consumers to spend. A decrease in consumer confidence could therefore result in a decrease in household consumption spending, with a pronounced effect on retail and motor vehicle sales.

The consumer confidence index is an aggregation of consumers’ perceptions of the potential for economic growth, their confidence in their finances, and whether they think it is an appropriate time to buy durable goods like vehicles and furniture.

Consumers were incredibly pessimistic about the state of the economy and did not think it was a good time to buy durable goods.

The consumer confidence decline mirrors the recent deterioration in retailer confidence, which also fell to levels experienced through the height of the pandemic. 

Here is a breakdown of the consumer confidence figures:

What caused the drop?

FNB chief economist Mamello Matikinca-Ngwenya said that record levels of load-shedding are a primary cause of the downturn.

“The alarming increase in power outages since December and the deterioration in South Africa’s economic prospects no doubt rocked consumer sentiment during the first quarter,” she said.

The IMF recently released a bleak growth forecast for the country. They expect economic growth of 0.1% for the country in 2023.

Inflation has also come in higher than expected. Sharp increases in food and transport costs drove the 7% inflation rate in February.

“Another interest rate hike and a sharp depreciation in the rand exchange rate likely added insult to injury,” said Matikinca-Ngwenya.

Consumer confidence chart