Consumer confidence maintains rebound in fourth quarter, but remains in negative territory

The FNB/BER Consumer Confidence Index has maintained its rebound, adding 11 points for a fourth quarter (Q4) reading of -12, FNB said on Monday. The low-income group of consumers had the biggest bound, helped by the easing of lockdown restrictions, which enabled much of the low-wage workforce to return to work, and the extension of social grant top-ups. 

In Q2, the Consumer Confidence Index plunged 22 points to a 35-year low of -33 as the hard lockdown shut down the economy. Rebounds were only to be expected from such a low base as economic activity perked up and the index in Q3 rose 10 points to -23. Upward momentum has been maintained this quarter with the 11-point rise to -12.



A glance at the graphic shows that it remains well shy of the record peak of +26 it reached in Q1 2018, which is kind of curious as the economy was hardly on fire then. But renewed confidence, or “Ramaphoria”, clearly took hold after President Cyril Ramaphosa replaced the confidence-shattering Jacob Zuma after the ANC’s elective conference.

All three income groups – low, middle and high – saw a bounce in confidence levels in Q4. The middle-income category, defined as households with a monthly income of between R2,500 and R20,000, rose 12 points to -13. Confidence among high-income consumers climbed 11 points, but at -16 remains at a depressed level – during the 2019 festive season, the reading was -4. 

By contrast, the confidence level among households earning less than R2,500 a month surged 16 points to -4. (The fact that the minimum income level of the upper category is almost 10 times that of the top bracket for the low-income groups speaks volumes about South Africa’s glaring economic disparities). Why would consumers at the bottom of the income ladder see their confidence ascend the most rungs?

“The further easing of restrictions and a concomitant uptick in economic activity greatly benefits low-income households in South Africa, as most low-income consumers were unable to earn a living by working from home,” FNB chief economist Mamello Matikinca-Ngwenya said in a statement.

This makes sense. Many white-collar workers who fall in the two upper categories could work from home and did not lose income as a result. That is clearly not an option for waiters, domestic workers and other low-wage labourers.

“Millions of low-income households would also have been relieved to hear that the expiration date for the Covid-19-related social grant top-ups was extended from October until the end of December 2020, while the unemployed will continue to benefit from the Social Relief of Distress grant until January 2021,” Matikinca-Ngwenya said.

So, in a sense, the Consumer Confidence Index is also a gauge of the political appeal of such grants to the ANC’s low-income political base.

The fact that the index remains mired in negative territory bodes ill for the pace of recovery. Indeed, retail sales decreased 0.2% month on month in October, Statistics South Africa data showed last week, the first monthly decline since April, which witnessed a collapse of almost 50%.

“The rebound in consumer confidence is good news for the broader South African economy, as household consumption accounts for roughly two-thirds of South Africa’s GDP. However, the fact that the confidence levels of affluent consumers – the group with the largest spending power – are still so depressed points to a more muted recovery in overall consumer spending during the fourth quarter compared with the noticeable jump witnessed in the Consumer Confidence Index,” said Matikinca-Ngwenya. DM/BM