Big turn for South Africans earning over R20,000 per month

Consumer confidence remains downbeat in South Africa, but households earning more than R20,000 per month are far more optimistic than at the start of the year.

This is largely thanks to an improvement in households finances due to two-pot withdrawals in the new financial year, as well as lower inflation because of fuel price cuts.

The first quarter of the year saw most South Africans beaten down by talk of a two percentage point VAT hike, stage 6 load shedding, and deteriorating relations with the United States.

These factors eased in Q2, resulting in a sharp turn in sentiment. However, despite the turn, the overall picture remains pessimistic, with consumer confidence in the negatives.

After dropping from -6 to -20 index points during Q1 2025, the FNB/BER Consumer Confidence Index (CCI) rebounded to -10 in Q2.

Q2 saw a partial recovery in consumer confidence from -20 to -10, with the reading on par with what was seen in Q2 2024. 

However, the latest results remain below the more positive readings recorded during the second half of 2024.

Consumer confidence has also been well below the average CCI reading of -1 since 1994, indicating that consumers are relatively pessimistic about the economy’s outlook.

Continued stress points include a lack of relief in income tax and medical aid tax credits in the 2025 budget, as well as ongoing global tensions and geopolitical escalations.

All three sub-indices of the CCI recovered some lost ground during Q2, with the economic outlook sub-index rebounding from -32 to -18.

Consumers are still notably more pessimistic about South Africa’s economic prospects than their expectations (-9) at the end of last year.

The household finances sub-index of the CCI improved from -1 to 9, while the sub-index measuring the appropriateness of the present time to buy durable goods rebounded from -28 to -21.

On the back of another interest rate cut and sustained low durable goods inflation, the time-to-buy-durables index is the only sub-index of the CCI that reverted to its Q4 2024 level.

High-income South Africans are downbeat

A breakdown of the CCI per household income group also showed that sentiment improved notably among high- and middle-income consumers, but not much among low-income households.

After dropping from -4 to -30 index points during Q1, the confidence levels of high-income households (earning over R20,000 per month) rebounded to -11 in Q2.

Although there was a rebound, confidence remains below levels seen in the second half of 2024. 

FNB Chief Economist Mamello Matikinca-Ngwenya said that it was unsurprising that sentiment among high-income households settled a lower level compared to a year earlier.

This comes off the back of “the deterioration in both the global and domestic economic outlook in recent months, coupled with Budget 3.0 making no inflationary adjustments to income tax brackets and medical aid tax credits.”

The confidence levels of middle-income households, earning between R5,000 and R20,000 per month, reverted to -7, on par with their sentiment level at the end of 2024.

Middle-income confidence is also far higher than high- and low-income confidence.

“Additional two-pot pension fund withdrawals at the start of the new financial year in March and another 25-basis-point cut in the prime interest rate at the end of May support highly indebted middle-income households in particular,” added Matikinca-Ngwenya.

Low-income earners are unlikely to have pension funds, while the R30,000 annual cap on two-pot withdrawals implies only a slight boost to high-income households compared to their middle-income counterparts.

Lower fuel prices and the increased availability of affordable new vehicles benefit middle-income households.

The confidence levels of low-income households (earning less than R5,000 per month) only increased by two index points to -15.

“Lower fuel prices and above-inflation adjustments to social grants are bolstering the spending power of low-income households,” said Matikinca-Ngwenya.

“However, most low-income households do not have access to formal sector credit or pension funds and therefore do not benefit from interest rate cuts or two-pot withdrawals.”

Food inflation increased from 1.5% in January to 4.4% in May, and is only projected to tick up further. This will primarily affect low-income households.

The devastating floods in the Eastern Cape and the alarming increase in the unemployment rate in Q1 may also be weighing down the confidence levels of less affluent consumers.