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

Consumer confidence may have dropped slightly in South Africa, but those earning over R20,000 are increasingly optimistic.

The FNB/BER Consumer Confidence Index (CCI) dropped marginally from -5 in Q3 2024 to -6 in Q4 2024.

This is still above the -15 index points in Q1 2024.

The latest reading remains slightly below the long-term average of the CCI (at zero since 1994).

However, the -6 recorded in Q4 is the best festive season consumer confidence reading since 2019 and far better than the -17 seen in Q4 2023.

Despite the one-point decline in consumer sentiment relative to Q3 2024, the upsurge in the CCI since the end of 2023 points to a marked increase in consumers’ willingness to spend during this holiday season.

The BER said that the marginal decline in the CCI during Q4 can be ascribed to slight deteriorations in the economic outlook and household finances sub-indices of the CCI.

Having jumped from -9 to -7 in the third quarter, the economic outlook sub-index of the CCI went back to its second-quarter level of -9 in the fourth quarter.

The household finances sub-index of the CCI also dropped from 14 to 11 index points. However, it remained above the level recorded during the first half of 2023.

Nevertheless, the sub-index measuring the appropriateness of the present time to buy durable goods (e.g., vehicles, furniture, household appliances and electronic goods) continued its upward trajectory, improving from -23 to a two-year high of -21 in the fourth quarter.

Income levels

A breakdown of the CCI per household income group shows that sentiment among high-income households improved further.

The confidence of high-income households (earning more than R20,000 per month) rose further from its five-year high of -6 in Q3 2024 to -4 in Q4 2024.

That said, the confidence levels of middle-income households (earning between R5,000 and R20,000 per month) retreated to -7 in Q4 2024, having hit -3 in the previous quarter.

Consumer sentiment among low-income households remained steady at -7 index points.

“A string of favourable developments has seen consumer confidence riding much higher since Q2 2024, including the formation of the GNU, the termination of load shedding, a substantial deceleration in inflation, two interest rate cuts and the implementation of the two-pot retirement system,” said FNB Chief Economist Mamello Matikinca-Ngwenya.

“However, headwinds started to emerge in November, arresting the upward trajectory of consumer confidence.”

“These include a marked depreciation in the rand exchange rate, a 25-cent per litre increase in the petrol price, lower stock prices on the JSE and concerns about the outlook for global trade and South African exports since the re-election of Donald Trump as the US president.”

“Even so, heading into the festive season with consumer confidence only one point shy of a five-year high bodes well for consumer-oriented companies.”

Bottom line

Despite the upward momentum of the CCI seems to have stalled during the fourth quarter, the latest consumer confidence reading of -6 is the highest festive season number since the COVID-19 pandemic broke out.

The upsurge in sentiment since the end of 2023 shows a pronounced increase in consumers’ willingness to spend compared to the last festive period.

Consumers’ ability to spend has also improved notably, bolstered by lower inflation (2.8% in October), 50 basis points worth of interest rate cuts and an estimated R40 billion in the two-pot retirement system payouts in 2024.

“The combination of much-improved willingness and ability to spend, particularly among affluent consumers, the group with the greatest spending power ̶, suggests that retail tills will jingle much louder this festive season,” said the BER.

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