Many South Africans can expect a bumper Christmas season — and probably a record season for retailers — in spite of the recent interest rate hikes.
This is the forecast of the latest First National Bank (FNB) and Bureau of Economic Research (BER) Consumer Confidence Index (CCI), released on Wednesday by the bank’s chief economist Cees Bruggemans.
He said the CCI had increased by one index point to plus 18 during the fourth quarter, following a decline from plus 20 in the second quarter to plus 17 during the third quarter of this year.
”Interest rate increases, therefore, did not set off an avalanche of consumer pessimism.
”The resilience of consumer confidence clearly illustrates the difference between the current business cycle and previous ones.”
However, it was only people with household incomes of more than R4 000 per month who were optimistic.
”Those earning between R800 and R4 000 barely changed their expectations, whereas the optimism of those earning less than R800 per month dropped sharply compared to the third quarter.”
Bruggemans said the rise in the confidence of high income earners — pulling in more than R8 000 a month — could be attributed mainly to a correction of the third quarter’s overreaction.
”The first increase in the interest rate in many years, a fall in the rand and a drop in upmarket house prices probably gave high income earners a scare.
”However, a realisation that the interest rate will this time probably increase by less in total than in the past, a rally in share prices and a recognition that the rand is not on a downward slide, produced the rebound in high income earner confidence.”
Bruggemans said people earning between R4 000 and R8 000 had their confidence boosted by a fall in the petrol price, sustained employment growth, sizeable salary increases and fixed monthly instalments on debt where the usury rate still applied.
They were also made to feel better by banks’ and retailers’ active extension of credit before the new National Credit Act comes into force in the middle of next year and strong growth in the prices of houses falling in the middle and lower segment of the market.
For those earning less than R800 a month, and whose confidence had been knocked, higher transport costs had eroded the real purchasing power of low income earners.
”White consumer confidence also rebounded, but black consumer confidence remained relatively stable during the fourth quarter.
”Similar to the high income group, the recovery in white consumer confidence can be attributed to a correction from overly pessimistic levels during the third quarter.”
On the possibility of a record retailer season, Bruggemans said the sustained high consumer confidence level underpinned the renewed strength in sales volumes.
”Durable goods, such as household furniture, appliances, electronic equipment and building materials — but not new vehicles — benefited from the partial rebound in high and middle income earners’ confidence.
”Consumer confidence will probably drift lower later next year as credit standards tighten. However, consumer confidence should not drop dramatically as long as real household income remains supportive, barring any unforeseen shocks.” – Sapa