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Johannesburg - The First National Bank/Bureau for
Economic Research (FNB/BER) consumer confidence
index (CCI) dropped by 7 index points from +11 in 2Q2011 to +4 in
3Q2011.
The FNB/BER CCI combines the results of three questions posed to adults in South Africa between 15 and 23 August 2011, namely the expected performance of the economy, the expected financial position of households and the rating of the appropriateness of the present time to buy durable goods, such as furniture, appliances and electronic equipment.
The third-quarter fall in the FNB/BER CCI can mostly be attributed to a large decline in the percentage of consumers expecting an improvement in the economy. The percentage expecting an improvement in their own finances also declined, but to a lesser extent, while the percentage rating the present as an unsuitable time to buy durable goods remained almost unchanged relative to 2Q2011.
The sharp fall in foreign and local share markets as well as news reports of much weaker economic growth in South Africa in the second quarter probably led many consumers to revise their outlook for the South African economy downwards.
The expected economic performance index dropped 15 index points - from +17 to +2. This is the biggest drop in the index since the middle of the global financial crises in 2Q2008.
The expected household financial position index declined from +22 to +15. Many consumers who scaled down their expectations of the economy's performance did not do so with respect to their own financial outlook.
"This index is now much higher than the other two, which indicates that many consumers still expect the worsening overall economic situation not to adversely affect their own finances," said FNB chief economist Cees Bruggemans.
The one index point increase (from -5 to -4) in the time to buy durable goods index is surprising. The time to buy index could easily have fallen by a large margin given the deteriorating economic outlook and increased uncertainty in 3Q2011.
The reasons why this index remained virtually unchanged could be many consumers' expectation that their own finances are shielded from these adverse economic developments, and news reports that the interest rate is unlikely to rise in the near future. There is even a chance that it could fall.
The confidence of high income earners (ie those earning in excess of R5 000 per month) fell by 5 index points (from +13 to +8) and that of low income earners by 8 points (from +9 to -1). However, these two broad groups mask some divergent underlying developments.
The confidence of all sub-groups except for the higher middle income group (ie those earning between R5 000 and R10 000 per month) declined during 3Q2011.
The higher middle income group scaled down their outlook for the South African economy only marginally, left their optimistic expectations for their own finances unchanged and switched their rating of the suitability of the present time to buy durable goods from wrong to right.
Previously, a net 7% of higher middle income earners rated the present as the wrong time to buy durable goods. Currently, a net 4% rate it as the right time. The contrary view of this group could partly be attributed to the fact that civil servants (whose continued employment is secure) and workers who received higher wage increases through recent strike action make up a large part of this group.
"In conclusion," said Bruggemans, "news reports about the fall in share markets and low economic growth gave many consumers a scare in 3Q2011. As a result, more consumers expect the economic performance to deteriorate and some of these foresee that this will also hurt their own finances over the next 12 months.
"Despite becoming less confident about the prospects for the economy and their own finances over the next 12 months, consumers did not change their view that the present time to buy durable goods is somewhat inopportune.
"The fall in the FNB/BER CCI indicates that consumers' willingness to spend has come off the boil. Compared to the recent past, they will therefore likely spend a slightly smaller share of income on goods and services and be less inclined to incur debt in the near term future.
"In all, consumer spending is likely to moderate should consumer confidence remain at this lower level in subsequent quarters."
The FNB/BER CCI combines the results of three questions posed to adults in South Africa between 15 and 23 August 2011, namely the expected performance of the economy, the expected financial position of households and the rating of the appropriateness of the present time to buy durable goods, such as furniture, appliances and electronic equipment.
The third-quarter fall in the FNB/BER CCI can mostly be attributed to a large decline in the percentage of consumers expecting an improvement in the economy. The percentage expecting an improvement in their own finances also declined, but to a lesser extent, while the percentage rating the present as an unsuitable time to buy durable goods remained almost unchanged relative to 2Q2011.
The sharp fall in foreign and local share markets as well as news reports of much weaker economic growth in South Africa in the second quarter probably led many consumers to revise their outlook for the South African economy downwards.
The expected economic performance index dropped 15 index points - from +17 to +2. This is the biggest drop in the index since the middle of the global financial crises in 2Q2008.
The expected household financial position index declined from +22 to +15. Many consumers who scaled down their expectations of the economy's performance did not do so with respect to their own financial outlook.
"This index is now much higher than the other two, which indicates that many consumers still expect the worsening overall economic situation not to adversely affect their own finances," said FNB chief economist Cees Bruggemans.
The one index point increase (from -5 to -4) in the time to buy durable goods index is surprising. The time to buy index could easily have fallen by a large margin given the deteriorating economic outlook and increased uncertainty in 3Q2011.
The reasons why this index remained virtually unchanged could be many consumers' expectation that their own finances are shielded from these adverse economic developments, and news reports that the interest rate is unlikely to rise in the near future. There is even a chance that it could fall.
The confidence of high income earners (ie those earning in excess of R5 000 per month) fell by 5 index points (from +13 to +8) and that of low income earners by 8 points (from +9 to -1). However, these two broad groups mask some divergent underlying developments.
The confidence of all sub-groups except for the higher middle income group (ie those earning between R5 000 and R10 000 per month) declined during 3Q2011.
The higher middle income group scaled down their outlook for the South African economy only marginally, left their optimistic expectations for their own finances unchanged and switched their rating of the suitability of the present time to buy durable goods from wrong to right.
Previously, a net 7% of higher middle income earners rated the present as the wrong time to buy durable goods. Currently, a net 4% rate it as the right time. The contrary view of this group could partly be attributed to the fact that civil servants (whose continued employment is secure) and workers who received higher wage increases through recent strike action make up a large part of this group.
"In conclusion," said Bruggemans, "news reports about the fall in share markets and low economic growth gave many consumers a scare in 3Q2011. As a result, more consumers expect the economic performance to deteriorate and some of these foresee that this will also hurt their own finances over the next 12 months.
"Despite becoming less confident about the prospects for the economy and their own finances over the next 12 months, consumers did not change their view that the present time to buy durable goods is somewhat inopportune.
"The fall in the FNB/BER CCI indicates that consumers' willingness to spend has come off the boil. Compared to the recent past, they will therefore likely spend a slightly smaller share of income on goods and services and be less inclined to incur debt in the near term future.
"In all, consumer spending is likely to moderate should consumer confidence remain at this lower level in subsequent quarters."
