The First National Bank (FNB)/Bureau for Economic Research Consumer Confidence Index (CCI) was unchanged at -7 points in the fourth quarter of 2019.
FNB stated in a release on Tuesday that the -7 index point mark remained the lowest level since the fourth quarter of 2017, which recorded a -8 index point mark.
It was also well below the long-run average reading for the CCI of +2 since 1994.
The bank explained that the three subindices of the CCI had not changed materially between the third and fourth quarters of 2019.
Following a massive deterioration in the economic outlook subindex during the third quarter – from +11 to -17 – the economic outlook index only clawed back three index pints to -14 in the fourth quarter.
“The majority of consumers, therefore, still expected South Africa’s economic prospects to deteriorate over the next 12 months.
“The household financial outlook subindex of the CCI had slipped by one index point from +12 to +11, while the index measuring the appropriateness of the present time to buy durable goods, such as vehicles and furniture, had fallen from -15 to -18 during the fourth quarter last year,” FNB noted.
“Consumer sentiment remains depressed on the back of weak economic growth, record-high unemployment and Eskom's ongoing electricity supply crisis and financial woes.
“Further, the 2019 Medium-Term Budget Policy Statement delivered by Finance Minister Tito Mboweni at the end of October highlighted a stark further deterioration in government finances, raising concerns about possible cutbacks in government employment, additional tax hikes for consumers and Moody's lowering South Africa's only remaining investment-grade sovereign credit rating to junk status in 2020,” FNB senior economist Siphamandla Mkhwanazi pointed out.
He added that the high unemployment rate and struggling State-owned enterprises also impacted on the CCI results for the fourth quarter.
Heightened concerns about the economy, coupled with a depreciation in the rand exchange rate and high real interest rates, are, in turn, dampening consumers' appetite for and ability to afford big-ticket purchases.
FNB highlighted that the fact that the vast majority of consumers considered the fourth quarter as the inappropriate time to buy durable goods did not bode well for jewellery, furniture, household appliances and other high-end retailers during the 2019 festive season.
Mkhwanazi said that with household budgets and consumer confidence now both under pressure, consumers were likely to tighten the reins on their purchases of expensive luxuries.
Instead, the tills of retailers in clothing, footwear, food, beverages and other basic necessities – as well as retailers that are perceived to offer great value for money – were likely to have jingled more frequently during the 2019 festive season.
A rise in consumer confidence reflects an increased willingness of consumers to spend. However, this willingness only translates into actual sales if consumers’ ability to spend improves.
“Their ability to spend depends on their inflation adjusted after-tax income and the availability of credit. A rise in consumer confidence could therefore result in an upturn in household consumption spending in general and retail and motor vehicle sales in particular. The opposite applies when the level of consumer confidence declines,” FNB explained.
Investec commented that South Africa is likely to see an economic growth rate of only 0.8% year-on-year this year, as a number of structural problems remain unresolved. The asset management group pointed out that not all areas of South Africa’s economy performed poorly in 2019. For example, the private sector made substantial fixed investment in the middle two quarters, of 15.8% quarter-on-quarter seasonally adjusted annualised (qqsaa) more in the second quarter of 2019, and 10.8% qqsaa more in the third quarter, showing that the private sector is not on an investment strike.