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Cape Town - South Africa's consumer confidence edged up from negative territory in the fourth quarter of 2014, although it remained below the key long-term average reading of 5, a survey showed on Thursday.
The index edged up 1 point to 0 in Q4 from -1 in the previous three months, with high income consumers still more optimistic about their financial prospects than low income households, compilers First National Bank (FNB) and the Bureau for Economic Research said.
"The fact that the South African Reserve Bank did not hike interest rates in November was good news for middle and high income consumers with high debt levels," said John Loos, an economic strategist at FNB.
"The substantial drop in the petrol price since August 2014, in turn, should really bolster the purchasing power of low-income households in the run-up to Christmas, who typically spend a large proportion of their household budgets on transport costs," he added.
The FNB/BER CCI combines the results of three questions posed to adults in South Africa between 10 and 25 October 2014, namely the expected performance of the economy, the expected financial position of households and the rating of the appropriateness of the present time to buy durable goods, such as furniture, appliances and electronic equipment.
"The end of the crippling strikes in the platinum and metals and engineering sectors, coupled with the 13% drop in the petrol price since August 2014, will alleviate some of the downward pressure on the domestic economy and bolster the disposable income of households," said Loos.
Listen to the full interview with Loos and Fin24's Matthew le Cordeur:
However, Loos pointed out that "A number of factors will continue to weigh on South Africa's economic growth potential over the next 2-3 years. These include acute electricity supply constraints, rising interest rates, strained labour relations and the risk of further industrial action, particularly by public sector workers early in 2015.
“In addition, the National Treasury signalled a tightening in fiscal policy in the Medium Term Budget Policy Statement in October, including a further slowdown in government spending and higher taxes."
"Buoyed by a substantial drop in the petrol price, a moderation in food inflation and a recovery in strike-affected incomes, consumers' ability to spend should continue to mend in coming months. The growth in real consumer spending is therefore projected to quicken relative to the pedestrian pace recorded over the last 12 months.
“However, the combination of tighter monetary and fiscal policy, as well as looming power outages and the real risk of further industrial action, will check the magnitude of the recovery."
- Fin24 and Sapa.
