If the results of the FNB/Ber Consumer Confidence Index are anything to go by, retailers can breathe a sigh of relief – there are indications it may be a till-ringing Christmas, after all.
The index shows that consumer confidence is holding steady at +14 (this is a diffusion index, so a result of +20 would in effect mean that 60% of respondents were positive while 40% were negative). This result shows that well over half the respondents feel now is a good time to buy durable goods like furniture, appliances and electronic goods.
To put this in context, 2Â 500 mainly urban adults were surveyed with regard to their expectations about the economy, what their household finances will look like in a year’s time, and whether they are ready to spend on durables.
The most optimistic are, naturally, the high and middle income groups, but even low middle incomes showed greater confidence. Only low incomes (those earning below R2Â 000 a month) indicated that they are not confident enough to commit to making big purchases — their confidence level dropped from -5 to -13.
Cees Bruggemans, FNB’s chief economist, said the index essentially shows consumer willingness — South Africans are keen to spend and, if they also have the ability to do so, they probably will. “I don’t agree with forecasts that it will be a gloomy Christmas,” Bruggemans says. “The income is there. Bonus payouts will be bigger this year (than last year). The interest rates are low. I think it will be a good Christmas.”
Consumer confidence returning
Bruggemans said households are really returning to levels of confidence one sees during long-ish periods of prosperity, historically speaking, despite the economic meltdown that hit the US and Europe in particular. “The results were a surprise to us,”
Bruggemans admits. “We’ve really had a meteoric come-back in terms of confidence.”
But there is a noticeably widening gap between high and low income groups. High-income earners (those earning R10Â 000 or more) have a confidence level of +23, as against zero in the case of low income earners.
Bruggemans says the high income earners have probably not been much affected by retrenchments, being most highly skilled, and have also received salary increases above inflation.
On the plus side, disposable income among South Africans is growing all the time and although many households are over-indebted this is not, in many cases, permanent. “A lot of people are deleveraging, so it’s a mistake to see over-indebtedness as something absolute,” says Bruggemans.
With another interest-rate cut a possibility and credit easier to come by, many households may have reason to feel optimistic this Christmas. But it’s still a good idea to be cautious and not max out your credit card this season – even if you are a high-income earner.
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