'Shopping beats recession blues'

Johannesburg - The depressing economic environment is prompting many South Africans to make feel-good purchases such as clothing, accessories and entertainment.

This is according to a Mastercard survey on consumer purchasing priorities, which was conducted across 21 countries during March and April 2009. The survey investigates how consumers plan to spend their discretionary income - money left after spending on essential household goods - over the next six months.

The majority of South Africans don't plan to cut down on discretionary spending in the remainder of 2009. However, only one-fifth of respondents said they would increase discretionary spending.

"Even though we have seen several interest rate cuts since December 2008, the psychological effect of lower rates has not kicked in yet," said Anton van der Merwe, vice-president of commerce at Mastercard Africa.

"People will still be tightening their belts," he said, adding that the threat of retrenchment is clouding sentiment and pushing people to save more in case they are caught in a "tough situation".

Interestingly, feel-good items have topped the list of consumer's purchasing priorities for the next six months, according to the survey.

Property appeals to those with funds

The number one discretionary spending priority of South Africans for the next six months is fashion and accessories, followed closely by dining and entertainment. Upgrading and maintenance of property trails at third place.

These three segments trump spending on education and cars.

Van der Merwe said the reason is psychological. Depressed consumers value relatively inexpensive items, such as a pair of shoes as opposed to a new car, because they provide an instant boost in self-confidence and morale without the onerous repayment plan.

This trend is not unique to South Africa. The survey shows that fashion and entertainment featured strongly as spending priorities in 21 markets, which include both developed and emerging economies.

As far as property renovation goes, Rodger George, consumer business industry leader at Deloitte SA, said: "Many South Africans consider investing in property a reliable form of long-term investing, and since we are currently in a buyer's market, South Africans who can afford it will be looking to invest in property at this time."

Most South Africans (71%) plan to save more or as much as before over the next six months - with most aiming at putting away anything between 1% to 20% of their income.

The primary reason why South Africans plan to increase saving is that most view the economic climate as uncertain and want to be prepared for unforeseen emergency expenditures.

- Fin24.com