Consumers are feeling a little better about their financial position as the effects of the recession wear off.
But South Africans are still not spending more than they need to right now. This should change, though, as our confidence improves, suggests an FNB/Bureau for Economic Research (BER) survey on consumer confidence.
According to the survey, third-quarter results are marginally better than they were in in the second quarter, rising an index point, from 14 to 15.
Last week’s rate cut has made a difference to our spending power, so confidence should rise further in the last quarter of the year.
According to Stanlib economist Kevin Lings, confidence improved among high income earners but declined among those whose earnings are lower, suggesting that South Africans are still worried about job losses.
Historically, the single biggest factor affecting consumer confidence is employment conditions. “While I expect the job market to continue to stabilise, I don’t think we’ll get a meaningful improvement in employment until well into 2011,” says Lings.
Yes, consumer confidence has increased but one must remember that domestic interests rates were cut to their lowest level in decades in March 2010, and the World Cup gave us a boost.
On the other hand, Lings points out that confidence is above the long-term (25-year) average by a mere two index points.
“I think confidence will rise a little more but it will remain well below the previous peak,” says Lings. “It should get a boost from the lower rates and the further improvement in household finances. But the recent public-sector strike and political disputes may dampen things.”
To put the index points in context, the index has fluctuated between extreme confidence (+23) and an extreme lack of confidence (-36).
The consumer confidence index is derived from 2 500 personal at-home interviews, covering all demographics in metropolitan areas, cities, towns and villages throughout South Africa.
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