SA still feeling recession's bite

Johannesburg - South Africans are still feeling the recession bite, despite a small improvement in the economy, and it will take time for consumer spending to rise to any degree, a survey has found.

People were, nonetheless, confident about the future, according to TNS Research Surveys, which released its Economic Confidence Index findings on Thursday.

This was largely because of improved sentiment about inflation, it said, cautioning that this confidence could be critically affected by Eskom's request for 35% prices hikes over the next three years.

Inflation of eight percent to 8.6% in the first half of last year, dropped to 6.1% in September, and was back within the South African Reserve Bank's target range, at 5.8 percent, in November.

Confidence was also affected by improved sentiment around business conditions and the availability of jobs.

TNS said people's confidence in the state of the economy was key factor in how they managed their finances and made, or put off, buying decisions.

It found that the recession had affected poorer people first, with wealthier people reaching their all-time low in November.

All groups were now showing high expectations for future improvement, suggesting a slow rise out of the doldrums in the first half of 2010.

The survey consisted of face-to-face interviews with 2000 people in their homes in the country's major metropolitan areas and had a margin of error of less than 2.5%.

TNS said the results were set against a backdrop of three successive quarterly falls in economic growth, followed by a marginal increase, and decreasing inflation.

Real household consumption expenditure weakened in the second quarter of 2009, and remained subdued in the second half of the year alongside declining real disposable income and high levels of household debt despite reduced demand for credit.

Interest rates had also recently stabilised after a steady decline in the first half of 2009, and the fuel price had dropped.

- Sapa