South Africa’s consumer confidence ticked up in the third quarter as consumers were upbeat about their spending power, partly on the back of interest-rate cuts, a survey showed on Monday.
A Bureau for Economic Research (BER) survey, sponsored by First National Bank (FNB), showed the consumer confidence index rose by one index point to 15 in the third quarter, from 14 in the second quarter and 15 in the first quarter of 2010.
The South African Reserve Bank cut interest rates by 50 basis points to 6% on Thursday, bringing the cumulative monetary easing since December 2008 to 600 basis points.
The FNB/BER survey looks at consumers’ expectations on economic performance, financial households’ situation and asks them to rate whether now is the time for buying durable items.
“Consumers remained optimistic about the twelve-month prospects for the economy as a whole and their own finances, but still remained somewhat hesitant to commit themselves on a large scale to purchase big items,” FNB/BER said in a statement.
South African consumers have been hampered by high levels of indebtedness and employment worries after the economy shed more than a million jobs since the beginning of 2009.
Analysts say the interest-rate cut last week should allow consumers to facilitate debt more easily and be able to use their incomes to spend more in coming months.
Domestic demand has previously lagged the broader economic recovery from recession experienced in 2009, however household consumption expenditure is showing signs of improvement.
Also helping consumers is inflation, which hit a four-year low of 3,7% in July, well within the central bank’s target of between 3% and 6%.
“Consumer spending is likely to continue growing strongly in the near-term future thanks to rising incomes … and the boost to real purchasing power that the fall in inflation provided,” the FNB/BER statement said.
The South African Reserve Bank’s Governor Gill Marcus said last week positive impetus to household consumption expenditure includes lower nominal interest rates, lower inflation and high levels of real wage increases for those that have jobs. — Reuters