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Johannesburg - Consumer confidence continued to rise in the second quarter of 2009 even though the economy is in a recession, according to data compiled by First National Bank (FNB) and the Bureau of Economic Research (BER).
During the period the FNB/BER consumer confidence index (CCI) rose by three index points, from +1 in the first quarter of 2009 to +4 in the second.
"At first glance, this rise comes as a surprise," said FNB chief economist Cees Bruggemans, adding that Reserve Bank data revealed drops in consumer spending and real personal disposable income during the first quarter. Statistics SA data also showed contractions in retail sales and employment.
"With the economy having completed two quarterly declines in economic growth, from the fourth quarter of 2008 to the first of 2009, with the second quarter of 2009 also shaping as a decline, and with the third quarter probably being touch and go, we are still in recession and some way from exiting it, probably only from the fourth quarter of 2009," Bruggemans said.
He said that in the most recent survey, significantly more consumers expect economic performance to be better in 12 months time compared to the previous survey.
"The net majority expecting an improvement jumped from +4 during the first quarter of 2009 to +17 during the second quarter of 2009," he said.
"The main reason for this is the dramatic cut in the interest rate. The April election outcome, promises of jobs, the increase in social grants, the recovery in share prices and the strengthening of the rand probably also convinced many consumers the economy will perform better in a year's time", said Bruggemans.
He said consumer spending is contracting due to a combination of consumer reluctance and negative shocks affecting their spending ability.
"However, consumer spending will most likely edge up in tandem with consumers' improved willingness and ability to spend in due course," Bruggemans said.
He said a fall in the household debt service ratio should strengthen consumers' ability to spend, although continued retrenchment may temper an upturn.
Fin24.com