Consumer confidence among South Africans earning over R20,000 is at a three-year high, and further improvements could occur if the Government of National Unity (GNU) remains intact.
The FNB/BER Consumer Confidence Index (CCI) increased to -12 in the second quarter of 2024 after jumping by two points, from -17 to -15 index points in the first quarter.
This reflects a notable shift in sentiment from the end of 2023.
The survey was conducted between 3 and 14 June, after the national election was declared but before the configuration of the GNU was finalised.
Despite increasing, the CCI of -12 is still below the longer-term average of 0 (neutral), with respondents uncertain about which parties will ultimately join the GNU.
Nevertheless, the latest consumer confidence reading is still the highest in 18 months (since 2022Q4, when the CCI reached -8), pointing to a small improvement in consumer spending compared to the very weak performance over the last year.
FNB said that the increase in the CCI over the quarter was due to a further improvement in the economic outlook sub-index and a small increase in the sub-index measuring the appropriateness of the present time to buy durable goods, such as vehicles and furniture.
The economic sub-index extended its gains in the first quarter to year by increasing to -16 – the highest the index has been since 2021Q4
After dropping from -25 to -30 in 2024Q1, the time-to-buy durable goods sub-index partially recovered to -28.
The household finances sub-index stayed steady at 8 during the second quarter after three consecutive upticks:
Income levels
A breakdown of the CCI per household income group showed that the slight improvement in overall confidence was driven by upticks in the confidence levels of middle—and low-income households.
The confidence levels of middle-income households (those earning between R5 000 and R20 000 per month) increased from -17 index points to -10.
The confidence of low-income households (earning less than R5 000 per month) improved from -16 to -10.
For high-income households (earning more than R20 000 per month), confidence levels remained unchanged at -14.
Despite being the most pessimistic of all income levels, high-income households are the most positive they’ve been since 2021:
“Positive developments such as the cessation of load shedding during the second quarter, substantial cuts in fuel prices in June, a R20 increase in the SRD grant from April and a significant deceleration in food inflation likely buoyed confidence levels, particularly among low- and middle-income consumers,” said FNB Chief Economist Mamello Matikinca-Ngwenya.
“However, high interest rates and uncertainty over which parties would form part of South Africa’s government of national unity probably kept the lid on high-income confidence.”
“Provided that the GNU remains intact and the JSE and rand exchange rate hold onto their recent gains, there is scope for an improvement in high-income confidence during the third quarter.”
FNB said that real growth in consumer spending has sorely disappointed over the last year, with a 0.4% year-on-year contraction in Q1 2024.
The gradual improvement in consumer sentiment and lower inflation should boost household consumption in the coming months.
“However, with the prime interest rate still at a 15-year high of 11.75%, consumers continue to shy away from big-ticket durable goods – as indicated by the 11.7% y-o-y contraction in new passenger car sales in May 2024,” said FNB.
“Should the positive sentiment towards SA hold (following the formation of the GNU), the stronger rand exchange rate will allow for lower import prices and provide scope for the SARB to cut the prime interest rate in September – this should ignite a stronger recovery in consumer spending towards the final quarter of 2024.”
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