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Consumer confidence tumbles as economic outlook sours

Having already slipped from -9 to -13 index points during the first quarter of 2022, the FNB/BER Consumer Confidence Index (CCI) plunged to -25 in the second quarter of 2022.   Bar the CCI reading of -33 in the second quarter of 2020 – when the sudden outbreak of the COVID pandemic and subsequent implementation of level 5 lockdown pummelled sentiment – the current reading is the lowest in more than 3 decades. Whereas official data shows that the growth in real consumer spending remained robust (3.2% year-on-year) during the first quarter of 2022, the dramatic deterioration in consumer sentiment now signals a marked slowdown in consumer spending in coming months.


The remarkable collapse of the CCI during the second quarter of 2022 can be ascribed to a major deterioration in the economic outlook sub-index of the CCI (from -18 to -39) and a complete turnabout in the household financial prospects sub-index (from +8 to -5). The index measuring the appropriateness of the present time to buy durable goods (e.g. vehicles, furniture, household appliances and electronic goods) also edged down (from -28 to -32), indicating that consumers consider the present as an inappropriate time to purchase durable goods.

A more detailed breakdown of the CCI shows that, while consumer confidence fell notably across all income groups, high-income confidence has soured more than low-income confidence since the end of 2021. Having already slumped from -11 to -18 index points in the first quarter, the confidence level of high-income households (earning more than R20 000 per month) crashed to -30 in the second quarter. This reading is only 3 index points north of the historic low of -33 recorded for this sub-index in the second quarter of 2020, with the vast majority of affluent households now anticipating a deterioration in their household finances and, in particular, in South Africa’s economic growth rate. Similarly, the confidence level of middle-income households (earning between R2 500 and R20 000 p.m.) slumped from -11 to -23, while low-income confidence (consumers earning less than R2 500 per month) declined from -6 to -16 index points. Although consumer sentiment is now very depressed across all three income groups, affluent consumers are considerably more downbeat compared to low-income households.

January, the consumer price inflation rate breached the 6% upper range of the SARB’s target for the first time in 5 years and the prime interest rate has been hiked by 75 basis points since the start of the year. Whereas spiralling food and fuel prices are probably of primary concern to less affluent households, the prospects of further steep interest rate hikes and sinking share prices on the JSE would have compounded the inflationary pressures when it comes to middle- and high-income households.”

Mamello Matikinca-Ngwenya noted that “The non-payment of the R350 per month social relief of distress (SRD) grant to 10.6 million South Africans in April and May in all likelihood also weighed on the confidence levels of many low-income households. However, a substantial improvement in job creation in recent months and Sassa’s commitment to resume the SRD grant payments at the end of June – as well as to catch-up all missed payments from July – probably prevented an even more pronounced decline in low-income confidence during the second quarter.”

Bottom line

Although consumer sentiment was widely expected to weaken further given the worsening inflation and interest rate outlook, the extent of the drop in consumer confidence is alarming. Save for the panicked level 5 lockdown period during the initial outbreak of the COVID pandemic in SA (2020Q2, when confidence nosedived to -33), the FNB/BER CCI is now at its lowest level in 35 years. While household consumption expenditure still surprised on the upside in the first quarter of 2022, the dramatic deterioration in confidence points to a sudden slump in consumers’ willingness to spend and foreshadows a significant slowdown in real consumer spending growth relative to the strong first quarter.

Even though consumers are likely to tighten their purse strings, the surprisingly large fall in the CCI could signify somewhat of an overreaction to recent developments and may not translate into an equally large contraction in consumer spending.  Matikinca-Ngwenya noted that “Positive developments such as the scrapping of all remaining COVID-19 regulations – including the wearing of masks, limits on gatherings and border checks – a gradual recovery in job creation and the back payment of missed SRD grants could counter some of the mounting inflationary and interest rate pressures. Savings accumulation among affluent consumers over the last two years should also underpin spending by high-income households. Nevertheless, the combination of soaring food and fuel prices and increased wariness among consumers will no doubt see a realignment of consumer budgets. Households will likely start to draw on savings and slash their discretionary spending – especially on big-ticket durable goods – to buttress purchases of basic necessities and support the recovery in spending on clothing, restaurants, recreation and entertainment following the lifting of COVID restrictions.”


Consumer confidence surveys provide regular assessments of consumer attitudes and expectations and are used to evaluate economic trends and prospects. The surveys are designed to explore why changes in consumer expectations occur and how these changes influence consumer spending and saving decisions.

The FNB/BER CCI combines the results of three questions posed to adults in South Africa, 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.

Until the second quarter of 2019, the FNB/BER CCI was based on face-to-face interviews of between 2 000 and 2 500 urban adults. The BER switched to telephone call surveys in the third quarter of 2019.  The 500 respondents are representative of the racial and household income composition of the urban adult population of South Africa. Internationally, the majority of CCIs is based on telephone call surveys.

Consumer confidence is expressed as a net balance. The net balance is derived as the percentage of respondents expecting an improvement / good time to buy durable goods less the percentage expecting a deterioration / bad time to buy durable goods.

A low level of confidence indicates that consumers are concerned about the future. They may be worried about job security, pay raises and bonuses. With such a frame of mind, consumers tend to cut spending to basic necessities (e.g. food and services) to free up income for debt repayment. If confidence is high, consumers tend to incur debt (or reduce savings) and increase spending on discretionary items, such as furniture, household equipment, motor vehicles, clothing and footwear. Some of these items are often financed on credit. Spending on these items declines when confidence is low, as households can generally delay their purchase without experiencing an immediate deterioration in living conditions.

A rise in consumer confidence reflects an increased willingness of consumers to spend. However, this willingness only translates into actual sales if consumers’ ability to spend improves. Their ability to spend depends on their inflation adjusted after-tax income and the availability of credit. A rise in consumer confidence could therefore result in an upturn in household consumption spending in general and retail and motor vehicle sales in particular. The opposite applies when the level of consumer confidence declines.

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