Johannesburg - Consumer confidence plunged to a nine-year low during the first quarter of this year‚ signalling that household spending‚ the economy's main engine‚ would be subdued this year‚ according to a survey released on Tuesday.
An index compiled by the Bureau for Economic Research (BER) and sponsored by First National Bank (FNB) fell to -7 points from -3 points in the fourth quarter of last year.
"Not even at the height of the global financial crisis in 2008 were consumers as downbeat about the country's economic prospects and their household finances as they are now‚" FNB chief economist Sizwe Nxedlana said.
"Whereas the growth in household consumption expenditure was the mainstay behind the domestic economic recovery between 2010 and 2012‚ the growth in consumer spending is expected to be subdued and much less supportive of economic growth in 2013."
Concerns over employment‚ violent strikes‚ threats of power failures and rising inflation were all conspiring to weigh on consumer confidence‚ he said.
The FNB/BER consumer confidence index (CCI) is now at its lowest level since the first quarter of 2004‚ and beneath the trough of -4‚ which it hit during the global financial crisis in 2008.
During the first quarter of this year there was a significant deterioration in consumer expectations about the performance of the economy‚ their financial prospects‚ and the appropriateness of the present time to buy durable goods‚ FNB said.
"Given the deterioration in the outlook for fixed investment and job creation on the back of the violent wildcat strikes in the mining‚ transport and agricultural sectors‚ as well as threats of power failures in coming months‚ consumers are understandably concerned about the outlook for the domestic economy‚" Nxedlana said.
Figures from Statistics SA showed that the economy shed 68 000 jobs during the fourth quarter of last year‚ bringing employment growth down to 0.6% compared to the same quarter of last year.
In addition to job losses‚ rising inflation and slower growth in credit extension had probably started to weigh on the financial position of households‚ Nxedlana said.
He noted that petrol prices had climbed by 22% since July 2012 to record levels while the rand had depreciated by 20% against the US dollar in the past year‚ fanning price pressures for imported goods.
Although the recent deceleration in food price inflation and the decision by the National Energy Regulator to grant lower electricity price hikes than Eskom had requested was good news for consumers‚ it would not be enough to check inflation in the short-term‚ he said.
Inflation was expected to breach the upper end of its 3% to 6% official target range in the next couple of months after touching 5.9% in February.
Personal income tax cuts announced in this year’s national budget would bring some relief to low- and middle-income households‚ but would not be enough to counter the adverse implications of waning employment growth‚ higher inflation and slower growth in social grant spending by the government‚" Nxedlana said.
He pointed out that there were signs that growth in unsecured lending had started to slow - particularly to low-income consumers.
With their financial position sub-index of the CCI at a five-year low of 0 index points‚ low income households earning less than R5 000 per month were significantly more pessimistic about the outlook for their finances than high income households‚ which had a reading of +9.
The sub-index rating the appropriate time to buy durable goods declined from -12 to -15 index points‚ indicating that an even larger majority of consumers considered the present time as inappropriate to purchase durable goods.
“The combination of deteriorating real disposable income growth‚ slower credit extension and higher prices for imported durable goods probably persuaded many consumers to postpone their durable goods purchases‚" Nxedlana said.
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