Consumer confidence among SA's high-income earners takes a knock | Fin24
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Consumer confidence among SA's high-income earners takes a knock

Jul 13 2017 06:01

Cape Town - Consumer confidence among high-income earners in South Africa has taken a large unfavourable swing, Sanisha Packirisamy, an economist at Momentum Investments said on Wednesday.

"While jobs growth in the high-skilled area of the economy has been positive for six consecutive quarters, growth slowed in the latest print for the first quarter of the year," she said in reaction to the latest FNB and Bureau of Economic Research (BER) Consumer Confidence Index (CCI) for the second quarter of 2017.  

"Higher-income earners have also been hit with more onerous taxes, which have negatively affected disposable income. Wealth gains, while still positive, are dwindling for higher-income earners which adds to the headwinds facing the upper end of the income-earning scale."

The gap in confidence between low- and high-income earners narrowed from a record high 23 points in the first quarter to 8 points in the second quarter of 2017, according to the BER CCI.

"While subdued levels of consumer confidence persisted for the low-income earning group (earning less than R2 999 per month), confidence swung into negative territory for high-income earners (earning in excess of R14 000 per month) - from 5 index points in the first quarter to negative 8 points in the second quarter," said Packirisamy.  

"During the second quarter, high-income earners became more negative on viewing the current time as appropriate to buy durable goods - from negative 3 points to negative 8 points - but the key factor underlying pessimism at the upper end of the market was the extent to which high-income earners’ expectations of the economy in a year’s time deteriorated. This reading fell from 7 index points to negative 26 points in just one reading."

The BER CCI slid from negative 5 index points to negative 9 in the second quarter of the year. Packirisamy pointed out that both first and second quarter readings were released together on Wednesday, given a delay in the first quarter’s readings due to a switch in market research firms.

She also pointed out that consumer sentiment has been tracking in negative territory - with the exception of one quarter when the index had a flat reading - for three years, which registers as the longest period of depressed sentiment since 1982, when the BER started reporting on the consumer sentiment survey data.

"Suppressed consumer sentiment prints remain discouraging for consumer spend this year. Although we expect lower-income earners to benefit from a downward trend in food inflation, Momentum Investments does not expect a robust recovery in employment," said Packirisamy.

She pointed out that Stats SA’s Quarterly Labour Force Survey showed a year-on-year increase in jobs growth for low and semi-skilled workers in the first quarter of the year.

"But muted business confidence warns against significant employment creation in this area of the economy in upcoming quarters," she said.

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