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Consumers less upbeat about economy

Jul 18 2012 13:30 Sapa

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Johannesburg - Consumer confidence in the country's economic prospects declined from five index points to -3 in the second quarter of 2012.

This was revealed in the FNB/BER Consumer Confidence Index (CCI) released on Wednesday.

Consumers' rating of the prospects for the national economy, the outlook for their own finances and the appropriateness of the present time to buy durable goods all deteriorated in the second quarter of 2012.

Cees Bruggemans, chief economist at FNB, said consumer confidence was currently at its lowest level since absorbing the serial shocks of early 2008.

"Coupled with a deterioration in the outlook for household income growth, the decline in consumer confidence foreshadows a substantial slowdown in the growth in household consumption expenditure during the remainder of 2012," Bruggemans said in a statement.

The CCI has been edging lower since reaching a peak of 15 index points in the third quarter of 2010, around the time of the 2010 Soccer World Cup.

In 2011, the CCI shed 9 index points to end the year at five, and during the second quarter of 2012 the CCI fell by another 8 index points.

"Given that the average reading for the CCI since 1994 is six index points, the latest reading of -3 index points suggests that consumer confidence is currently low and not supportive of consumer spending," he said.

The FNB/BER CCI combines the results of three questions posed to adults in South Africa between May 15 and 28, 2012.

Consumers are asked about their expectations of the performance of the economy, financial position of households and the rating of the appropriateness of the present time to buy durable goods.

During the second quarter of 2012 consumers' rating of the prospects for the national economy and their own finances deteriorated.

In addition, consumer confidence weakened across all household income, population, age, gender and language groups.

The economic outlook sub-index of the CCI dropped from four to -5 index points, indicating that most consumers now expect the economic situation to worsen over the next 12 months.

With the exception of 2008, when the country suffered power outages, this was the first time since 2004 that South African consumers anticipated economic conditions to weaken.

"Not even at the height of the global financial crisis in 2008 were consumers as downbeat about the country's economic prospects as now," said Bruggemans.

He said the decline reflected the recent deterioration in global economic sentiment, as well as in the domestic political climate.

The percentage of consumers expecting their financial position to improve over the next 12 months slumped from +16 index points to +8 between the first and second quarter of 2012.

Bruggemans said given that the survey was conducted when the petrol price reached a record high of R12.22 in Gauteng, the fuel hikes also weighed on consumers' view of their finances.

Having declined from -2 to -6 index points during the first quarter of 2012, the time to buy durable goods sub-index of the CCI fell further to a two-and-a-half year low of -11 index points.

"Durable goods retailers and new vehicle dealers enjoyed exceptionally strong growth in sales volumes over the last two years, but the decline in the index indicates that consumers are now becoming more cautious about purchasing durable goods."

Bruggemans said consumer spending could pick up again in 2013 as the combination of lower inflation and stable nominal wage increases supported household income.

 
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