The Bureau for Economic Research (BER) reported on 24 April that South African consumer confidence deteriorated during the first quarter of 2019.

The First National Bank (FNB)/BER Consumer Confidence Index (CCI) declined to a reading of 2 in 2019Q1, down from a figure of 7 in the preceding three-month period.

While consumer confidence remained net positive – any reading above 0 is positive – the latest reading was the lowest since the appointment of President Cyril Ramaphosa in February 2018. The BER report is available here.

Lullu Krugel, chief economist at PwC Strategy& and Christie Viljoen, economist at PwC Strategy&, analyse the figures.

The CCI is calculated based on representative survey responses to questions about the expected performance of the South African economy, the expected financial position of households, and a view on the appropriateness of the present time to buy durable goods (e.g. vehicles, furniture, appliances and electronic equipment). Quarterly consumer confidence measurements provide analysts with regular assessments of consumer attitudes and expectations, and are used to evaluate economic trends and prospects for the overall economy.

The latest FNB/BER CCI indicates that South Africans do not expect the local economy to show any improvement over the coming 12 months. This is a dramatic change from just a year ago when there was great optimism following the appointment of President Ramaphosa. Some of the factors contributing to this deteriorated outlook include the implementation of stage 4 loadshedding, prolonged labour strikes, a weaker exchange rate, and sharp increases in fuel prices. The BER indicated that the decline in the overall CCI was largely associated with this deterioration in consumers’ perspective on where the South African economy is going.

Households view on their financial prospects have been somewhat positive and little changed over the past three quarters. The current volume of households expecting an improvement in their financial position is in line with long-term averages and do not suggest any boost to the overall economy. Regarding the purchase of durable goods, a small majority of survey respondents indicate the present as an inappropriate time to purchase these items. This is already visible in several components of retail sales data.

The latest South African Reserve Bank (SARB) Monetary Policy Review (available here) indicated that the central bank’s short-term outlook for economic growth has downside risks due to weak business and consumer confidence as well as electricity supply constraints. The SARB said during March it expects real economic growth of 1.3% this year, down from an estimate of 1.7% reported in January. The downward revision already took into account a slower global economy, decline in business confidence, loadshedding, and growing pressure on household disposable income. The SARB Monetary Policy Committee (MPC) is expected to also take into account this week’s weak consumer confidence data when it reports revised growth forecasts late next month.