The FNB/BER Consumer Confidence Index (CCI) edged up slightly, from -10 to -9 index points, during the fourth quarter of 2021.[1] After an initial strong rebound, the onset of the third COVID-19 wave and the expiration of the social relief of distress grant saw the CCI slipping from -9 to -13 during the second quarter of 2021, but the CCI recovered to -10 in the third quarter of 2021. The latest reading of -9 brings the CCI back to the level recorded in the first quarter of 2021, and also equals the last reading that was recorded just prior to the onset of the COVID-19 pandemic in South Africa (in the first quarter of 2020). However, at -9, the CCI remains well below the average CCI reading (of +2 since 1994) and therefore still points to low levels of consumer confidence in South Africa.
It should be noted that most of the fieldwork for the consumer confidence survey was completed by the time South Africa announced the discovery of a new COVID-19 variant. Given the subsequent reintroduction of travel bans against South Africans and fears that existing COVID-19 vaccines could be less effective against this highly mutated Omicron variant, this development may well dent consumer confidence in coming months.
Details
The marginal increase in the CCI during the fourth quarter of 2021 can be ascribed to small improvements in the economic outlook (from -14 to -12) and household financial position (from +12 to +14) sub-indices of the CCI. However, consumers remained pessimistic about the appropriateness of the present time to buy durable goods (e.g. vehicles, furniture, household appliances and electronic goods), with this index slipping from -29 to -30 index points.
19Q4 | 20Q1 | 20Q2 | 20Q3 | 20Q4 | 21Q1 | 21Q2 | 21Q3 | 21Q4 | |
Overall FNB/BER CCI | -7 | -9 | -33 | -23 | -12 | -9 | -13 | -10 | -9 |
Economic outlook | -14 | -16 | -21 | -23 | -12 | -5 | -14 | -14 | -12 |
Household financial outlook | 11 | 14 | -13 | -2 | 6 | 10 | 10 | 12 | 14 |
Suitability of the present time to buy durable goods | -18 | -26 | -64 | -44 | -30 | -32 | -36 | -29 | -30 |
A breakdown of the CCI per household income group shows that the confidence levels of high-income households (earning more than R20 000 per month) remained unchanged at -11 during the fourth quarter, but middle- and low-income confidence edged up slightly. The confidence level of middle-income households (earning between R2 500 and R20 000 per month) increased by 1 index point, while the low-income confidence index (consumers earning less than R2 500 per month) extended its recovery from -12 to -9. Heading into the festive season, the confidence levels of all three income groups are at broadly similar (negative) levels.
FNB Senior Economist Siphamandla Mkhwanazi said that “Faced with a welter of conflicting signals, consumer sentiment remained relatively flat during the fourth quarter of 2021. Encouragingly, in the first half of November, COVID-19 infection rates dropped to the lowest levels in nearly 18 months, and economic activity – particularly in the hospitality sector – continued to recover. However, adverse developments such as soaring fuel prices, increased load-shedding, strikes, supply chain disruptions and stock shortages have started to weigh on SA’s economic growth prospects and are preventing a stronger rebound in sentiment. The latest consumer confidence reading corresponds with the RMB/BER Business Confidence Index, which also remained flat during the fourth quarter.”
Bottom line
At -9 index points, the CCI has clawed back most of the ground lost since the outbreak of the COVID-19 pandemic in the first quarter of 2020. Even so, consumer sentiment remains quite negative, and the uncertainty surrounding Omicron, ensuing travel bans and the looming fourth coronavirus wave will likely depress consumer confidence even further. “Whereas international travel restrictions typically affect the sentiment of affluent consumers, low- and middle-income households will arguably suffer the most in terms of job creation and income prospects if the expected bumper tourist season does not materialize and lockdown restrictions once again hammer the hospitality sector during the holidays. With confidence levels already fairly deep in negative terrain, the shift in consumer spending away from retail goods towards the services sector will likely slow, and grocery and furniture retailers will continue to win out over tourism, restaurants and entertainment services,” said Mkhwanazi.
[1] The fourth quarter CCI survey was conducted by means of a telephone call survey between 15 and 26 November 2021. Most of the fieldwork for the survey had therefore been completed by the time that South Africa announced the discovery of a new COVID-19 variant on 25 November.
