New low for South Africans earning more than R20,000 a month

After tanking from -8 to -23 index points during the first quarter of 2023, the FNB/BER Consumer Confidence Index (CCI) dropped even further to -25 index points during the second quarter of 2023.
According to the Bureau for Economic Research (BER), the CCI has varied between a low of -36 recorded during the hard Covid-19 lockdown in 2020Q2 and a high of +26 when Cyril Ramaphosa was elected as the country’s president in 2018Q1, with an average reading of zero since 1994.
The latest reading of -25 is the second-lowest CCI reading on record since 1994 and indicative of tremendous concern among consumers about South Africa’s economic prospects and their household finances.
“Consumer confidence has now dropped back to the same low level that was recorded during the second quarter of 2022 when the economic ramifications of the Ukrainian war – including soaring fuel and food prices, higher interest rates and slumping share prices on the JSE – became clear,” the BER said.
Consumer confidence was also negative across all sub-indices.
The economic outlook sub-index of the CCI dropped by 3 index points to -37, while the time-to-buy durable goods index eased by a further point to -35.
“Both of these indices are now deeply negative, suggesting that the vast majority of consumers expect a deterioration in South Africa’s economic growth over the next 12 months and consider the present time as highly inappropriate to purchase durable goods (e.g. vehicles, furniture, household appliances and electronic goods),” the BER said.
The household financial outlook sub-index of the CCI 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.
“In all, consumers appear to be far more pessimistic about the outlook for the national economy compared to their household finances,” the economists noted.
Middle-class and high-income alarms
A more detailed breakdown of the CCI shows that along income lines, for the second consecutive quarter, the confidence levels of high-income households earning more than R20,000 per month deteriorated the most, 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, but they now also fear that their household finances will worsen over the next 12 months, the BER said.
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) also weakened 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 Covid-19 pandemic,” the group said.
FNB Chief Economist Mamello Matikinca-Ngwenya said that 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.
“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 (e.g., home loans, as opposed to unsecured debt).”
“With the prime interest rate having increased by 475 basis points over the last 2 years, debt servicing costs are really starting to bite. The weaker rand exchange rate is also putting upward pressure on the cost of overseas travel and imported goods such as new vehicles, typically purchased by affluent consumers.”
Load shedding and sustained high food inflation are likely of primary concern to low- and middle-income households, but sharply lower paraffin prices and the extension of the jobs recovery in the services sector may be cushioning the impact on less affluent consumers, Matikinca-Ngwenya said.
Warning for retail
The BER said that 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 different income groups.
“The sales volumes of expensive durable goods such as new vehicles, jewellery, furniture and household appliances – and 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,” it said.
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 amidst extraordinarily depressed consumer sentiment,” the BER said.
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