Consumer confidence perks up

Johannesburg - Confidence among consumers is at its highest since the beginning of 2008, as data showed South Africans are expecting the economy and their personal finances to perk up.

This is according to the latest First National Bank and Bureau of Economic Research (FNB/BER) Consumer Confidence Index (CCI), which grew by five index points. It went up from one during the third quarter of 2009, to six in the fourth quarter.

"The current reading of +6 is the highest since the first quarter," FNB said. "Thus a small but growing majority of urban South African adults expressed themselves as confident in the fourth quarter of 2009."

The FNB/BER CCI is based on three questions: expected economic performance, the expected financial situation of households, and a rating of the appropriateness of the present time to buy durable goods (such as furniture, appliances, electronic equipment and cars).

The latest survey shows an improvement in all three of the sub-indices.

The largest improvement was in consumers' rating of now as a good time to buy durable goods, even though it remained negative. The net percentage of consumers rating the present as an inappropriate time to buy durable goods decreased by eight index points, from a nine-year low of -23 to -15.

"Consumers expect an improvement in South Africa's economic performance during the next 12 months and they also see their own finances improving," the survey said.

According to First National Bank chief economist Cees Bruggemans, consumers can be regarded as considerably optimistic about the outlook for economic performance and household finances, even if they are still quite wary about forking out money for big-ticket items.

Festive hope for non-durables

The fourth quarter of 2009 CCI survey results corroborates the findings of the BER's latest retail survey results.

The BER's fourth-quarter 2009 retail survey results suggest that sales volumes for non-durable goods (eg food, beverages and groceries) and semi-durable items (eg clothing and footwear) will only be slightly lower this festive season, compared to the same quarter in 2008.

Bruggemans said: "The fact that a notably smaller percentage of consumers rated the present as an inappropriate time to purchase durable goods supports the view that the worst of the recession is behind us.

"However, consumers are clearly still in precautionary mode and therefore allocating a significantly smaller proportion of their budgets to big-ticket items compared to previous festive seasons."

In all, the uptick in consumer confidence denotes an increased willingness to spend among consumers - particularly among the high-income group, he said. "However, for this to translate into an actual increase in household spending, consumers' ability to spend must also improve.

"In this regard, real disposable incomes and credit extension probably showed little, if any, improvement yet during the fourth quarter of 2009. A more substantial recovery in household incomes and credit growth, and hence consumer spending, is expected from mid-2010," said Bruggemans.

- Fin24.com