Consumers emerge from misery

Johannesburg - Consumers seem to feel the dark days of the economic downturn are over, as data released on Tuesday show that confidence has returned to its highest point since the spending heydays of 2006 and 2007.

The consumer confidence index of First National Bank (FNB) and the Bureau for Economic Research (BER) has risen to 15 points in the first quarter of 2010, from six points in the last quarter of 2009 - the biggest increase between two consecutive quarters in five years.

FNB chief economist Cees Bruggemans called it the start of a "long wave of enduring consumer confidence".

Bruggemans said it comes as a surprise that South Africans are so positive about the state of the economy and their personal finances.

"What apparently really threw the sentiment switch [to the positive side] was the ultimate success of policy to end the global crisis," said Bruggemans.

Worldwide, panic in the financial and real estate sectors has been abruptly followed by strong reversals since the second quarter of 2009.

Big ticket items back on the shopping list

The FNB/BER consumer confidence index is based on three questions: the expected performance of the economy, the expected financial situation of households and the appropriateness of the present time to buy durable goods.

Bruggemans said the fact that South Africans have to some extent been spectators of the global economic crisis, and that government's policy stimulus has been "impressive, but never excessive", has boosted confidence.

The biggest change on the index occurred around the appropriateness to buy durable goods. The sub-index improved by a considerable 11 index points, from -15 to -4.

The percentage of consumers expecting an improvement in their own finances increased by seven index points. The survey also said confidence was boosted by low interest rates and the return of stability to the labour market.

However, the downturn will only be a thing of the past when credit growth emerges from the doldrums, said Chris Hart, chief economist at Investment Solutions. "Credit growth is at the cusp of the turning point."

According to Hart, consumer confidence stabilised as job losses were staunched.

"Going forward, actual improvement will be material to a broader section of society as employment increases," said Hart. "At the moment this only represents the 'haves', not the 'have-nots'."

- Fin24.com