Consumer confidence in South Africa rose slightly in the second quarter of 2003 compared to the first quarter of the year, with the FNB/BER consumer confidence index rising to -2 index points from -3 index points earlier.
According to the latest survey by First National Bank and the Bureau for Economic Research at Stellenbosch University released on Tuesday, consumer confidence remained “relatively high” during the second quarter of the year and was expected to grow, particularly among high-income groups, as the June reduction in the prime interest rate and possible additional cuts during the year started to boost consumer confidence further.
Cees Bruggemans, chief economist at FNB, said he expected that the personal tax cut and increase in civil pensions and child support grants announced in the February 2003 budget would continue to support consumer confidence.
“Lower price increases and higher salary and wage increases will also boost consumer confidence,” Bruggemans commented. “Bar any major unforeseen adverse developments, retrenchments in certain sectors (such as manufacturing), is the only possible negative factor for consumer confidence in the near-term.”
Commenting on the latest FNB/BER index results, Bruggemans said an examination of the factors that could potentially have influenced consumer confidence between the previous survey and the most recent one provided some explanations for the slight rise in confidence. These included the stronger rand, a 38-cent fall in the petrol price in May, lower rates of increase in food prices, the end of the Iraqi War, a further cut in personal taxes and increased grants and pensions.
On the other hand, media reports about the adverse impact of the strong rand on exporters, retrenchments in certain sectors, increased international economic uncertainty and a sharp fall in the JSE Securities Exchange Index could have hurt consumer confidence.
The survey revealed that during the second quarter of 2003, a net majority of households reporting an improvement in their finances declined slightly.
However, a larger net majority was expecting an improvement in economic performance and a smaller net majority rated the present as an inappropriate time to buy durable goods compared to the first quarter of the year.
Furthermore, a net majority of high-income earners expecting an improvement in their own financial position increased considerably in the first quarter, but declined slightly during the second quarter. By contrast, the net majority of low-income earners expecting a deterioration in their own financial position declined only slowly in both quarters.
“Although the increase in formal employment most likely added to the income of low-income earners, the high rates of food inflation and micro-lending and in-store debt burdens put pressure on disposable income,” Bruggemans observed.
The second quarter survey results were derived from a representative sample of 2 500 households and the fieldwork was conducted between May 8 and 30. This was after the February national budget but before the June interest rate cut. – I-Net Bridge