Ina Opperman

By Ina Opperman

Business Journalist


Consumer confidence at second lowest point since 1994

Consumer confidence in the economy is so low that consumers are spending money on essentials only and avoid buying durable goods.


Consumer confidence has decreased again, this time to its second lowest point since 1994. This low level of confidence indicates the tremendous concern among consumers about South Africa’s economic prospects and their household finances.

After the FNB/BER Consumer Confidence Index (CCI) plunged from -8 to -23 index points during the first quarter of 2023, it sagged further to -25 index points during the second quarter, a level similar to that seen in the second quarter of 2022 when the ramifications of the war in Ukraine started to become clear, including soaring fuel and food prices, higher interest rates and slumping share prices on the JSE. 

The latest index shows that the majority of consumers expect a weaker national economic performance over the next 12 months and they think it is a bad time to buy durable goods, while the outlook for their household finances took another knock. High-income households are the most pessimistic, with rand volatility and higher interest rates weighing on the relatively well-off in particular.

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The index varied between a low of -36 recorded during the hard Covid-19 lockdown in the second quarter of 2020 and a high of +26 (when Cyril Ramaphosa was elected as the country’s president in 2018), with an average reading of zero since 1994.

Consumer confidence slipped in all three sub-indices

All three sub-indices of the index slipped back further during the second quarter of 2023. The economic outlook sub-index fell by 3 index points to -37, while the time-to-buy durable goods index eased by another point to -35. This means that consumers will now be wary of spending money on durable goods, such as vehicles, furniture, household appliances and electronic goods.

The household financial outlook sub-index also eased further from -1 to -2 index points during the second quarter and is now also well below the average reading of +11 for this sub-index. Consumers now appear to be far more pessimistic about the outlook for the national economy than their household finances.

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It is notable that the confidence levels of high-income households (earning more than R20 000 per month) deteriorated the most for the second time, falling from -31 to a new historic low of -40.

Affluent consumers are not only highly alarmed about the outlook for the South African economy. They now 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 (earning between R5 000 and R20 000 per month) weakened slightly from -21 to -22, while low-income confidence (earning less than R5 000 per month) edged up 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 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,” Mamello Matikinca-Ngwenya, FNB chief economist, says.

“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 that is tied to the soaring prime interest rate, such as home loans, as opposed to unsecured debt. With the prime interest rate that increased by 475 basis points over the last two years, debt servicing costs are really starting to bite.”

Weaker rand also curtails spending

Matikinca-Ngwenya says the weaker rand exchange rate is also putting upward pressure on the cost of overseas travel and imported goods such as new vehicles, typically bought by affluent consumers.

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

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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 income groups. The sales volumes of expensive durable goods such as new vehicles, jewellery, furniture and household appliances, as well as 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, Matikinca-Ngwenya says.

“While low- and middle-income households are also quite 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, especially on the food price front, should prevent an outright collapse in real consumer spending during the second half of 2023.”

Foreign affairs faux pas and volatility of the rand

Economic research group, Oxford Economics Africa, said in response to the announcement that the South African government’s foreign affairs faux pas and the subsequent volatility in the rand exchange rate, as well as much higher interest rates, would have weighed on high-income household sentiment in particular.

The broader consumer confidence findings also line up with the latest employment figures, which show that both formal sector employment and gross earnings dropped in the first quarter. “In addition, we saw a continuation of the trend where the number of full-time employees continues to fall, while that of part-time employees showed some recovery.

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“This means that fewer South Africans had formal jobs during the first quarter, they were earning less and many have been forced to assume part-time roles as opposed to full-time employment. This would have had an adverse impact on financial security. In the absence of a solution to the unemployment problem, all these factors bode ill for consumer confidence going forward,” the group says.

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