SA consumers optimistic about income growth, but worry about inflation

Although South African consumers are optimistic and expect that their income will grow in the coming months, they are concerned about inflation as increasing prices makes it difficult for them to budget and plan their finances.

According to TransUnion’s Consumer Pulse Study for the first quarter of the year, South Africans remain financially resilient, making strategic financial adjustments amid inflation concerns and shifting credit trends, with 79% expecting their income will grow.

However, 82% of respondents are extremely or very concerned about inflation, with rising costs continuing to be a major stressor for consumers.

Ayesha Hatea, director of research and consulting at TransUnion, says despite the challenges of inflation and economic uncertainty, South Africans continue to show resilience in managing their finances.

“We are seeing notable shifts toward more purposeful financial planning, credit management and strategic spending. While economic pressures remain, consumers are finding ways to balance credit usage, savings and debt repayments more effectively.”

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SA consumers concerned about inflation and recession

The report highlights consumers’ ongoing financial concerns, with 42% of respondents stating that their household income is not keeping up with inflation, despite the fact that inflation is currently at the lower end of the Reserve Bank’s target range.

Hatea says these ongoing concerns could be due to 40% of consumers saying their income stayed the same over the past three months, while 22% reported it decreased.

“With more than six in ten South Africans reporting no increase in their income, it is clear to see why consumers are trying to find new ways to manage their financial commitments, including taking on more credit and different types of credit for key purchases.”

The survey data reveals that 37% of respondents plan to apply for new or refinance existing credit within the next year, with 52% of all those surveyed saying they used Buy Now, Pay Later services in the past 12 months.

While there are ongoing concerns about a recession, consumers indicated they are actively taking steps to prepare for this. Among those who said they think South Africa is currently in a recession or will be in one by the end of the first quarter, most respondents (59%) said they are preparing for a possible recession by reducing spending, followed by 58% saying they are building up their savings and 35% saying they are prioritising to pay down debt.

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Shifting trends in SA consumers’ debt repayments and savings

In addition, the data reveals shifting trends in debt repayments and savings. Hatea says it is concerning that 38% of respondents said they will be unable to pay at least one of their current bills and loans in full, up from 35% in the fourth quarter of 2024.

Among those who said they would be unable to pay, 34% reported they planned to pay partial amounts they could afford but not the whole balance, while 25% said they would dip into their savings to help pay their current bills and loans.

Another 20% of consumers aim to borrow money from friends or family members to meet their payment commitments, while 35% of those surveyed are planning to take on temporary or gig work.

“Managing debt effectively while maintaining savings is a key challenge for many South Africans. Consumers who struggle to meet their payment commitments should engage with their lenders to potentially renegotiate current payment terms.

“Lenders do not want consumers to default on their debts, and they are often willing to discuss available options with the intention of creating prudent, sustainable financial solutions.”

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Majority of SA consumers who plan to buy a new car will choose a green one

Hatea says one interesting key finding is that 36% of consumers planning a new vehicle loan or lease within the next year would consider hybrid vehicles, while 25% would consider an electric vehicle. In comparison, 32% preferred traditional internal combustion engine vehicles, making hybrid cars the top consideration for new vehicle loans or leases among those surveyed.

She points out that the latest TransUnion Vehicle Pricing Index (VPI) reflects this trend, with the anticipated introduction of more affordable EVs priced under R1 million expected to accelerate their adoption in 2025, thanks to broadening consumer options in the hybrid and EV market.

“This trend highlights how consumers are adapting to broader economic and environmental changes. Hybrid vehicles are becoming more accessible, and their appeal extends beyond cost savings to include long-term benefits, such as reduced environmental impact and lower running costs. As this market continues to evolve, we anticipate sustained growth in consumer interest and adoption.”

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Fraud still a major concern for SA consumers

The survey also showed that fraud is still a major concern for South African consumers. Hatea says the study highlights that nearly one in three respondents (31%) check their credit reports monthly, with 54% of those who said they monitor their credit doing it to improve their credit scores.

In addition, 34% of credit monitoring consumers said they check their credit reports to protect against fraudulent activity. More than half (51%) of all those surveyed reported being targeted by email, online, phone call or text messaging fraud in the last three months but not falling victim, emphasising the importance of heightened security awareness.

Some of the most common fraud schemes reported were money or gift card scams (33%), smashing (33%), phishing (32%) and third-party seller scams on legitimate online retail websites (31%), emphasising the urgency for consumers to remain vigilant.

“With digital transactions and online banking becoming standard, financial institutions are urged to implement stronger fraud prevention measures, while consumers are encouraged to monitor their credit activity and adopt safer financial practices,” Hatea says.

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SA consumers making strategic adjustments to household budgets

The survey also showed that consumers are making strategic adjustments to their household budgets in response to ongoing financial pressures, with 52% of respondents saying they have cut back on discretionary spending such as dining out, travel and entertainment, while 43% reported scaling back on large purchases such as furniture, appliances and cars.

Hatea says this cautious approach highlights a continued emphasis on financial resilience and long-term stability. “Our findings show that South Africans are taking a more proactive approach to managing their finances amid economic uncertainty.

“While financial pressures persist, consumers are prioritising essential spending, reducing discretionary expenses and making thoughtful financial decisions to maintain stability.”