South Africa

South African consumer confidence plummets

Consumer Confidence

The FNB/BER Consumer Confidence Index (CCI) for the second quarter of 2023 came in at -25 index points – the second-lowest CCI reading since 1994.

The CCI plunged from -8 to -23 index points during the first quarter of 2023 on the back of increased load-shedding. It has now deteriorated further.

Over the last three decades, CCI varied between a low of -36 – recorded during the hard Covid-19 lockdown – and a high of +26 – when Cyril Ramaphosa was elected as the country’s president. 

This latest reading is the second-lowest CCI reading on record since 1994 and points to tremendous concern among consumers about South Africa’s economic prospects and household finances. 

Consumer confidence has now dropped to the same low level recorded during the second quarter of 2022, when the economic impact of the Russia-Ukraine war – including soaring fuel and food prices, higher interest rates and slumping share prices on the JSE – became apparent.

According to FNB, all three sub-indices of the CCI slipped back further during the second quarter of 2023. 

The economic outlook sub-index of the CCI dropped by three index points to -37, while the time-to-buy durable goods index eased by a further point to -35. 

Both of these indices are deeply negative, suggesting that most consumers expect a deterioration in South Africa’s economic growth over the next 12 months and consider the present time highly inappropriate to purchase durable goods like vehicles and furniture. 

Source: FNB/BER

The household financial outlook sub-index of the CCI eased further from -1 to -2 index points during the second quarter and is now well below the average reading of +11 for this sub-index.

Consumers appear to be far more pessimistic about the national economic outlook than their household finances.

A more detailed breakdown of the CCI shows that, for the second consecutive quarter, the confidence levels of high-income households – those earning more than R20,000 per month – deteriorated the most, falling from -31 to a new historic low of -40. 

Affluent consumers are not only highly alarmed about the outlook for the SA economy but also fear that their household finances will worsen over the next 12 months. 

They are also the most pessimistic of all income groups about the appropriateness of the present time to buy durable goods.

The confidence levels of middle-income households – those earning between R5,000 and R20,000 per month – weakened slightly from -21 to -22.

Low-income confidence – those earning less than R5,000 per month – increased marginally from -17 to -16 index points. 

High-income confidence levels are now far lower compared to low- and middle-income confidence and even below the extraordinarily depressed levels attained during the height of the Covid-19 pandemic.

“Further interest rate hikes, rand depreciation and concerns about South Africa’s diplomatic relations with the rest of the world in all likelihood compounded the negative impact of the electricity crisis on high-income confidence,” FNB chief economist Mamello Matikinca-Ngwenya.

“Affluent consumers are more likely to have invested – at great expense – in alternative electricity sources such as solar or battery power and are also more inclined to have debt tied to the soaring prime interest rate.” 

In addition, with the prime interest rate having increased by 475 basis points over the last two years, debt servicing costs are starting to bite. 

The weaker rand exchange rate also puts upward pressure on the cost of overseas travel and imported goods, such as new vehicles, typically purchased by affluent consumers.

“Load-shedding and sustained high food inflation are likely of primary concern to low- and middle-income households, but sharply lower paraffin prices and the extension of the jobs recovery in the services sector may be cushioning the impact on less affluent consumers.”

Source: FNB/BER

The further deterioration in the confidence levels of high-income consumers does not bode well for the retail sector, as affluent consumers have the greatest spending power among the different income groups. 

The sales volumes of expensive durable goods such as new vehicles, jewellery, furniture and household appliances – and potentially even semi-durable goods such as clothing and footwear – are likely to deteriorate as high interest rates and costly investment in alternative power supply sources continue to erode the spending power of high-income households. 

While low- and middle-income households are also despondent, relatively steady confidence levels among these income groups in the second quarter point to some resilience among less affluent households. 

The incomplete post-Covid employment recovery and projected deceleration in inflation – particularly on the food price front – should prevent an outright collapse in real consumer spending during the second half of 2023 amidst extraordinarily depressed consumer sentiment.


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