Consumer confidence rose in the second quarter of 2009 on expectations of better times, according to a consumer confidence index released on Tuesday.
During the second quarter of this year, the First National Bank/Bureau for Economic Research (FNB/BER) consumer confidence index increased by three index points, from +1 during the first quarter of 2009 to +4 during the year’s second quarter.
Cees Bruggemans, chief economist at FNB, explained the rise in consumer confidence by referring to longer-term perspectives.
According to Bruggemans, these perspectives showed that results for the second quarter of 2009 were part of an upward trend in the FNB/BER consumer confidence index that started during the third quarter of 2008.
”The FNB/BER consumer confidence index has partially clawed back the losses of the first half of 2008 by increasing from -6 to +4 during the second half of 2008 and the first half of 2009,” he said.
In the most recent survey, significantly more consumers expected the economic performance to be better in 12 months’ time compared with the previous survey.
”The net majority expecting an improvement jumped from +4 during the first quarter of 2009 to +17 during the second quarter of the year.”
Bruggemans said the rise was broad-based.
”For instance, the net percentage of white consumers expecting an improved economic performance in 12 months’ time rose by 13 index points, and those of black consumers by 12 index points.
”Likewise, the net percentage of low-income earners expecting the economy to improve in 12 months’ time surged 18 index points, whereas that of the high-income earners rose by a respectable six index points,” he said.
The main reason for the significant upscaling in expectations was the dramatic cut in interest rates.
”The April election outcome, promises of jobs, the increase in social grants, the recovery in share prices and the strengthening of the rand probably also convinced many consumers that the economy will perform better in a year’s time,” said Bruggemans.
He added that the net percentage of consumers expecting their own finances to improve in 12 months’ time increased by a further two index points — from an already comparatively high +15 during the first quarter of 2009 to +17 during the second quarter of the year.
”With the lower interest rates and the resultant keenly awaited economic recovery, household income is expected to be improving over the next 12 months.
”Retrenchments are anticipated to recede, working hours and commissions to rise and house prices to stabilise,” Bruggemans said.
Although consumers were currently cautious, they expected the economy and their own finances to improve over the next 12 months, he added.
”Consumer spending is currently contracting due to the combination of consumers’ unwillingness to spend and net negative shocks to their ability to spend.”
However, Bruggemans said that consumer spending would most likely edge up in tandem with consumers’ improved willingness and ability to spend ”in due course”.
The improvement in cash flows following from the fall in the household debt-service ratio should strengthen consumers’ ability to spend over the next six to 12 months, but continued retrenchments — albeit at a lower tempo — could initially temper the rate of recovery in spending, he said. — Sapa