Consumer confidence in South Africa has spiked, making a massive comeback in the first quarter of 2018, according to the latest FNB/BER index published on Wednesday.
After hovering around -8 index points for most of 2017, the FNB/BER Consumer Confidence Index (CCI) skyrocketed to an all-time high of +26 in the first quarter of 2018.
The latest reading surpassed the previous record high of+23 index points reached in the first quarter of 2007 when the South African economy pumped out real economic growth of nearly 6%.
The 34-index point increase in the CCI in Q1 2018 is also the largest single quarter improvement in consumer sentiment since the BER started publishing a composite index of whites and blacks in 1982.
Previously, the biggest jump in the CCI occurred during the second quarter of 2004, when the CCI soared by 27 index points from -7 to +20.
Although positive political and economic developments also helped to shore up consumer confidence in 2004, the announcement that South Africa would host the 2010 World Cup Soccer Tournament in all likelihood contributed significantly to the large leap in the CCI at the time, it said.
The index is compiled by running consumer confidence surveys, which provide regular assessments of consumer attitudes and expectations, and are used to evaluate economic trends and prospects.
The complete turnabout in consumer sentiment during the first quarter of 2018 can be ascribed to massive jumps in all three sub-indices of the CCI.
Mamello Matikinca, chief economist of FNB, said that the extraordinary improvement in consumer sentiment during the first quarter of 2018 can largely be ascribed to the change in the country’s leadership, which triggered many positive economic developments.
Confidence was up across all levels of income.
For one, the rand exchange rate has strengthened by nearly R2.50 against the US dollar since mid-November 2017 (from R14.47 to R11.90 in recent days). This led to a R1 drop in the petrol price,
with the price of 95 unleaded petrol at the coast falling from R14.27 per litre in December 2017 to R13.27 in March 2018.
Similarly, the prices of other imported goods such as furniture, household appliances and electronic goods have also started to decline on the back of the stronger rand, bolstering the purchasing power of households.
Other positive developments since the end of 2017 that may have heartened some consumers include the government’s announcement that it would provide fee-free higher education and training for students from families with incomes less than R350,000 a year; the pushing back of “Day Zero”- the day when Cape Town’s taps were projected to run dry amidst a catastrophic three-yearlong
drought; as well as the cabinet reshuffle on 26 February, FNB said.
Matikinca pointed out that “while the VAT hike to 15% would have weighed on consumer sentiment, the zero rating of basic food items such as maize meal‚ brown bread‚ dried beans and rice will mitigate the impact of this tax increase on low-income households who spend a large proportion of their household budgets on food.
“In addition, the Finance Ministry announced some relief for the poor and the working class in the form of above-inflation increases in social grants expenditure and below-inflation increases in personal income tax for individuals earning less than R410,000 per year.”
According to FNB, the dramatic increase in consumer confidence during the first quarter of 2018 signals a substantial improvement in consumers’ willingness to spend, which will boost the economy.