Johannesburg - Consumer confidence levels remain very low and consumer spending is expected to continue to grow at a pedestrian pace, according to FNB chief economist Sizwe Nxedlana.
"While interest rate hikes will eventually also start to weigh on spending by more affluent households, consumer spending by lower income households will likely remain under the most pressure in coming months," he said.
"A confluence of adverse economic developments have gradually eroded the spending power of households over the last two years."
These include insufficient job creation, protracted industrial action, soaring fuel prices, higher household tax burdens (including the impact of e-tolls), a slowdown in household credit extension and a moderation in government wage growth and welfare spending.
"The fact that consumer confidence did not slump further during the first quarter of 2014 in the face of this barrage of negative factors, suggests that there may yet be some resilience in the consumer sector, particularly amongst high income households," Nxedlana said.
Confidence index
The latest FNB/BER consumer confidence index (CCI), released on Wednesday, improved from -7 to -6 index points during the first quarter of 2014.
The latest reading is only marginally higher compared to the decade low of -8 reached during the third quarter of 2013.
Consumers’ rating of the outlook for the national economy improved slightly, but their rating of the appropriateness of the present time to buy durable goods deteriorated to the lowest level since the 2009 recession.
Consumers’ rating of their own financial prospects were unchanged compared to the previous quarter, with high income consumers remaining much more optimistic about their household finances compared to low income consumers.
Power outages
The current level of consumer confidence is comparable to the reading of -6 recorded in the second quarter of 2008 when an acute shortage of electricity led to a spate of power outages throughout the country.
"Although domestic demand will likely remain under pressure in the face of rising inflation and interest rates and a slowdown in household income and credit growth, a gradual recovery in net exports should bolster real GDP growth during 2014, said Nxedlana.
"The upturn in world economic growth, coupled with a weak rand exchange rate, is boosting South Africa's export performance, while weaker domestic demand and rising import prices should, in turn, curtail import volumes."
"While interest rate hikes will eventually also start to weigh on spending by more affluent households, consumer spending by lower income households will likely remain under the most pressure in coming months," he said.
"A confluence of adverse economic developments have gradually eroded the spending power of households over the last two years."
These include insufficient job creation, protracted industrial action, soaring fuel prices, higher household tax burdens (including the impact of e-tolls), a slowdown in household credit extension and a moderation in government wage growth and welfare spending.
"The fact that consumer confidence did not slump further during the first quarter of 2014 in the face of this barrage of negative factors, suggests that there may yet be some resilience in the consumer sector, particularly amongst high income households," Nxedlana said.
Confidence index
The latest FNB/BER consumer confidence index (CCI), released on Wednesday, improved from -7 to -6 index points during the first quarter of 2014.
The latest reading is only marginally higher compared to the decade low of -8 reached during the third quarter of 2013.
Consumers’ rating of the outlook for the national economy improved slightly, but their rating of the appropriateness of the present time to buy durable goods deteriorated to the lowest level since the 2009 recession.
Consumers’ rating of their own financial prospects were unchanged compared to the previous quarter, with high income consumers remaining much more optimistic about their household finances compared to low income consumers.
Power outages
The current level of consumer confidence is comparable to the reading of -6 recorded in the second quarter of 2008 when an acute shortage of electricity led to a spate of power outages throughout the country.
"Although domestic demand will likely remain under pressure in the face of rising inflation and interest rates and a slowdown in household income and credit growth, a gradual recovery in net exports should bolster real GDP growth during 2014, said Nxedlana.
"The upturn in world economic growth, coupled with a weak rand exchange rate, is boosting South Africa's export performance, while weaker domestic demand and rising import prices should, in turn, curtail import volumes."