Consumer confidence declined further during the third quarter of 2007, according to First National Bank (FNB) and Stellenbosch University’s Bureau of Economic Research’s consumer confidence index (CCI) released on Tuesday.
The CCI declined by three index points — from 21 during the second quarter of 2007 to 18 during the third quarter of this year.
”Although the index has come down from its record high of +23 during the first half of 2007, the current level of +18 is still high by historical standards. This is the same high level compared with the second half of 2006,” said Cees Bruggemans, chief economist of FNB.
Consumers’ rating of the time to buy durable goods had barely changed between the second and third quarters of the year, he said.
During the third quarter, a net majority of 10% rated the present as a good time to buy durable goods, compared with 12% during the second quarter.
”A reading of +10 is high by historical standards and just below the record of +13 reached during the second quarter of 2005 and the first half of 2006.”
Furthermore, consumers’ expectations regarding the development of their own finances over the next 12 months barely changed.
During the third quarter of 2007, a net majority of 25% of respondents expected an improvement in their own finances, compared with 26% during the second quarter of 2007.
The three index-point decline in the composite index was caused by the third sub-component, namely consumers’ expectations regarding the economic performance over the next 12 months. Fewer consumers (19% net) expected the economic performance to improve over the next 12 months than previously (25%).
”Although this decline in the net number of optimists occurred across all income groups, races, ages and provinces, it was more pronounced in the case of white consumers and high income earners.
”So, although consumers expect the economy to slow down in the near-term future, they do not expect this to adversely affect their own finances and neither are they less willing to purchase durable goods,” said Bruggemans.
Although the results per income group remained largely unchanged relative to the second quarter of 2007, ”big changes occurred if one considers a longer period, such as the last three years”, he said.
The confidence of the high- and low-income group declined by three index points — to +19 and +17 respectively during the third quarter of 2007.
At +19, high-income earner confidence had come down from the average level of +24 achieved during the period of the first quarter of 2005 to the second quarter of 2006.
At +17, low-income earner confidence was in turn higher than the +12 for the same period.
High-income earner confidence was at present still relatively high, but it had declined from earlier records.
In contrast, low-income earner confidence increased further from earlier relatively elevated levels and as a result the gap with high-income earners had closed, Bruggemans said.
The different forces impacting on the respective income groups explained the longer term change.
”Employment growth, on top of generous social grants, has lifted the spirits of the low-income earners. In contrast, the higher interest rate and lower house-price increases, among other things, are weighing down on high-income earners,” said Bruggemans.
The fact that consumer confidence remained high during the third quarter of 2007 tied in with the Bureau of Economic Research’s retail survey.
Sales of non-durable goods (such as food, beverages, household goods and pharmaceuticals) — which represent the bulk of retail sales — remained lively and thereby held overall retailer confidence high.
However, retailers reported weaker sales of semi-durable (such as clothing, footwear, textiles and furnishings) and durable goods (furniture, appliances and electronic goods) during the third quarter of 2007.
”One would have expected that a decline in the majority of consumers rating the present as an appropriate time to buy durable goods would have been a contributing factor.
”However, the third quarter 2007 consumer confidence results revealed that consumers remained as satisfied with the present time to buy durable goods as previously,” he said. — Sapa