Consumer confidence remains positive

Consumer confidence is positive for the fourth quarter of the year, according to the First National Bank/Bureau for Economic Research consumer confidence index released on Tuesday.

“This has been the case throughout 2010, by itself rather unusual for an economy barely out of recession and at a time of much global turmoil,” said Cees Bruggemans, chief economist FNB, in a statement.

“This continues to suggest that despite much specific hardship, there were large pockets of South African consumers who recovered quickly from recession and crisis.”

In the first quarter of 2010, South African consumers’ overall confidence was high (+15) and they also showed some willingness to buy durables with an improvement from -15 to -4.

The next two quarters, however, saw these readings stagnate.

The index “has now held steady at this 14/15 level for a whole year, which is the longest consecutive period that the index registered no change”.

However, components of the index changed.

With the festive season looming, there has been some movement in “the time to buy durables” response, rising from -4 to zero.

“Historically, such a level of response and its improvement is taken as a strong indication of positive sentiment regarding time to buy durables.”

The sentiment was not shared across the board.

High incomes (over R10 000 monthly), high middle incomes (R5 000 to R10 000 monthly) and low middle incomes (R2 000 to R5 000 monthly) all had more positive readings.

However, low incomes, earning below R2 000 a month, shifted negatively from -5 to -13, indicating greater caution about committing to big purchases.

As those with higher earnings are more willing to spend, retailers, wholesalers, motor dealers and other service providers could expect increased sales in coming quarters.

There was a widening gap between the high and low income groups, those earning above R10 000 and below R2 000 per month respectively.

The confidence of the high income earners was at +23 compared to zero in the case of low income earners.

“The high income earners, who are also mostly highly skilled, probably have been affected proportionally less severely by the retrenchments. Those with secure jobs also benefited from generous salary increases,” said Bruggemans.

High income earners were highly confident about their financial prospects.

“Steady employment prospects and improved earnings potential as the economy recovers further were probably the main reasons.

“Along with the interest rate cut in September and growing speculation since then about yet another rate cut to come, this was probably an important reason for the further increase in willingness to consider buying durable goods.”

The rising stock market might have helped confidence, although the strained property market would have had the opposite effect.

Those with monthly incomes below R2 000 improved their sentiment about their own finances from +8 to +11 which was well below the levels of the other income groups, but on balance positive.

“On balance these results indicate an ongoing consumption revival in 2011 with strong support from especially high income earners,” said Bruggemans.

The index combines the results of three questions posed to 2500 mainly urban adults, namely the anticipated performance of the economy for the next 12 months, the expected household financial position in 12 months’ time and the rating of the suitability of the present time to buy durable goods, such as furniture, appliances and electronic goods.