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Consumer vulnerability at its lowest

Pretoria - 2013 was a pretty bad year for consumers who felt more financially vulnerable than they did in 2012, said Professor Bernadene de Clercq.

De Clercq headed the Bureau of Market Research team at UNISA which did the analysis that was collated into the Consumer Financial Vulnerability Index (CFVI) Report for the fourth quarter (Q4) of 2013, with the support of MBD.

The report was presented on Thursday and measures consumers’ perceptions of how vulnerable they feel financially, in terms of their income stream, their ability to save, their expenditure and if they can service their debt.

Consumer financial vulnerability was at its lowest point in 2013 since this analysis was first undertaken in 2009, when we were in economic recession.

The CFVI sat at a fairly uncomfortable 51.4 points in 2012, but dropped even further to 48.9 in 2013. Consumers who only felt mildly exposed in 2012 therefore felt very exposed in 2013.

But it could have been worse. Looking at the year quarter by quarter makes it plain that seasonal factors play a huge role in how consumers perceive their financial situation.

In the fourth quarter, people feel more buoyant and positive, perhaps because the year is coming to an end, possibly as an impact of receiving bonuses.

When the team compared Q4 of 2012 with Q4 2013, it showed that consumers ended the year on a higher note – the CFVI in Q4 2012 was significantly lower than Q4 in 2013.

The ‘high’ of Q4 lingers into Q1, said Professor de Clercq. The figures then show a hefty drop in the second quarter of the year, as reality sets in and the necessary purchases made at the beginning of the year for study purposes and other reasons begin to bite.

The third quarter saw a deeper dip. This is the traditional ‘strike season’ in South Africa; the fact that many of the country’s ‘middle class’ (people earning above the median of R3 500, embracing public servants, teachers and the like) will be out on strike and therefore foregoing earnings is reflected in the strong sense of financial vulnerability. From a low of 45.9, the index then swept up to the Q4 high of 52.

“In certain annual quarters, consumers are actually more positive than what they should be, they’ve almost got a false sense of security,” said Professor de Clercq, a conclusion she reached when the team ‘smoothed out’ the results to see what would happen if seasonality factors were stripped out.

“In other quarters, it’s the other way around – they’re too negative.”
Seasonality has a much bigger effect on consumers in terms of income vulnerability and savings, rather than debt servicing and expenditure.

“If consumers are secure about their income stream, they are secure about their saving,” explained Professor de Clercq, so these two factors march in tandem.

When real vulnerability sets in, they feel insecure about their ability to spend and service their debt.

Consumers are overly positive in Q1 and overly negative in Q3. This pattern repeats itself over and over again throughout the years the research has been done, creating almost identical graphs.

“It almost looks like we’ve copied and pasted the trend for the five years,” said Professor de Clercq. “We were quite shocked that we saw such a recurring trend when we take out the seasonal factors.”

These trends are worth bearing in mind if you are making financial decisions in either a high or a low period of the year – you may be operating from false negativity or false positivity.



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