Consumer confidence levels for the fourth quarter have registered their lowest reading since the 2015 festive season, data shows.

The FNB/BER Consumer Confidence Index, released on Monday, reflected a reading of -12. It is an improvement from the 35-year low of -33 recorded in the second quarter, as a result of the economic restrictions implemented due to the Covid-19 lockdown.

However, the reading is still well below the average reading of +2 since 1994, according to the report.

The consumer confidence index is based on surveys of consumer attitudes and expectations – to determine how they might influence consumer spending and saving decisions. A low level of confidence indicates consumers are concerned about the future, while a rise in consumer confidence reflects a willingness of consumers to spend.

All the sub-indices used to compile the overall consumer confidence index reported improvements. The economic outlook sub-index improved by 11 points to -12 and is nearly at the same level reported last year, of -14. The household financial outlook sub-index increased by 8 points to 6, but it is lower than the 11+ points recorded last year and lower than the 14 points recorded in the first quarter.

The sub-index measuring the appropriateness of the present time to buy durable goods – such as vehicles, furniture, household appliances and electronic goods – increased by 14 points to -30. This is, however, below the -18 reading reported for the same quarter last year.

"The vast majority of consumers across all income groups still consider the present time as highly inappropriate to purchase big-ticket items such as passenger cars, household furniture and jewellery," the report read.

The reading is the lowest of any fourth quarter since 1984, said FNB chief economist Mamello Matikinca-Ngwenya.

This suggests "durable goods sales are likely to underperform significantly during this festive season," she added. 

HOUSEHOLD INCOME
The consumer confidence index improved across different household income groups, with low-income households appearing to be more optimistic about the outlook of household finance, than high income households.

"The further easing of restrictions and concomitant uptick in economic activity greatly benefits low-income households in South Africa, as most low-income consumers were unable to earn a living by working from home," Matikinca-Ngwenya explained.

"Millions of low-income households would also have been relieved to hear that the expiration date for the Covid-19-related social grant top-ups were extended from October until the end of December 2020, while the unemployed will continue to benefit from the Social Relief of Distress grant until January 2021," she added.

The Covid-19 relief measures contribute an additional R6 billion to R7 billion of disposable income for poor households per month, Matikinca-Ngwenya explained. This, in turn, supports the non-durable goods sector, where low-income consumers spend the bulk of their household budgets.

"Slight declines in petrol and paraffin prices may also have bolstered low-income confidence somewhat during the fourth quarter," the report read.

The impact of the Covid-19 pandemic on the salaries and wages, as well as overtime payments, commissions and end-of-year bonuses are likely to affect affluent consumers and subsequently discretionary spending, according to the report.

Non-durable goods sales are expected to outperform other consumer spending categories over the festive period- but may be impacted as Covid-19 related grants expire. According to the report, a new wave of Covid-19 infections could also result in renewed lockdown restrictions and weigh down consumer sentiment.