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Consumer confidence rises in first quarter

Confidence among South Africa’s consumers increased in the first quarter of this year, on optimism about personal finances partly due to lower interest rates, a survey found on Tuesday.

The central bank cut interest rates by 100 basis points last week, adding to 150 basis points worth of reductions since December to help boost the economy and depressed demand.

Compilers First National Bank (FNB) and the Bureau for Economic Research (BER) said the consumer confidence index rose five points to one in the first quarter, from -4 in the fourth quarter of 2008.

The BER said lower interest rates, decreasing fuel costs and a slowing rate of inflation contributed to the rise in consumers confidence.

”This confidence index has been recovering … since its Q2 2008 cyclical low, its shape hinting at more upward potential, though whether reality will bear this out in coming quarters remains to be seen,” said FNB chief economist Cees Bruggemans.

”Our shock absorbers are fully operational from a consumer point of view, in terms of a lower oil price, falling interest rates and more government spending,” he said.

The BER said households expected to benefit indirectly as the fiscal stimulus counters the slump in economic activity.

Consumer spending has been depressed after interest rates went up by five percentage points between June 2006 and June 2008.

January’s retail sales data showed spending rose in the first month of 2009 but analysts expect household demand to remain depressed for most of 2009. – Reuters

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