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Johannesburg - Prospects are looking good for South African consumers in 2010, with experts predicting that big-ticket items could return to shopping lists.
"As 2010 advances, consumers will show confidence and optimism, and that will translate into spending on all types of big-ticket items," Cannon Asset Managers chief investment officer Adrian Saville said on Thursday.
Recent data show consumer confidence is on the up, after being negative for more than a year.
During the fourth quarter of 2009, a consumer confidence index (CCI) compiled by the Bureau of Economic Research for First National Bank rose to +6, from +1 in the third quarter of 2009. This is the highest reading since the first quarter of 2008, and is also higher than the long-term average of +2.
Looking ahead, the data also showed consumers were optimistic about their household finances, even if they remain slightly pessimistic about the appropriateness of buying durable consumer goods at present.
Saville said macro-economic drivers provide an indication of what consumers would experience in 2010.
In the first place, he said, interest rates are expected to stay where they are. "I'd be surprised if there are any increases in the interest rate this year. I'd rather say that there could be a modest outside chance that we might see them fall."
Secondly, a number of significant wage settlements took place in 2009. "If you look at both the public and private sector, increases were in the region of 8% to 12%.
"Inflation this year is running at 6%, so there's a real wage effect. With all else being equal, people will start feeling better off."
Inflation is likely to be more stable.
Football fillip
"Consumers have also been spending for some time to repair their balance sheets - for about the last two years now. This has been helped by interest rates," Saville said.
He added the 2010 Fifa World Cup would have a "once-off" benefit to the economy.
"We know that fixed investment spend has already been made, but I wouldn't underestimate the size of the benefits for consumers," Saville said.
"To guess the extent to which it will lift the economy by is very difficult. It all depends on the nature of the tourists, and whether they'll spend at the right places."
Using what Saville calls a back-of-the-envelope calculation, he sees the soccer tournament lifting economic growth by 1%, which will also feed into consumer sentiment.
On the downside, consumers could face a 35% electricity hike this year. A further risk is the rand's vulnerability at its current level against the dollar.
"We have uncertainty of the currency and electricity hikes as negatives. As it stands, we can argue that the positives outweigh the negatives. And if it plays out that way, economic growth should pick up," Saville said.
- Fin24.com
