Consumer confidence plunged seven points in the third quarter of 2011 as sentiment about the economy worsened, according to the FNB/Bureau for Economic Research consumer confidence index released on Monday.
“Overall consumer confidence dropped by seven points to +4 as fewer consumers expect the economy to improve …” FNB/BER said in a statement.
“The sharp fall in foreign and local share markets as well as news reports of much weaker economic growth in South Africa in the second quarter, probably led many consumers to revise their outlook for the South African economy downwards.”
The FNB/BER consumer confidence index measured +11 in the second quarter of 2011.
The drop suggested consumers would be less likely to spend on goods and services or incur debt in the near future.
The index combines the results of three questions asked of 2 500 urban adults in August 2011.
They are asked about the expected performance of the economy, the expected financial situation of their households and the rating of the appropriateness of the present time to buy big ticket items, such as furniture, appliances and electronic equipment.
Biggest decline
The expected economic performance index dropped 15 index points — from +17 to +2 — in its biggest decline since the middle of the global financial crises in the second quarter of 2008.
The expected household financial position fell from +22 to +15.
“This index is now much higher than the other two, which indicates that many consumers still expect the worsening overall economic situation not to adversely affect their own finances,” said Cees Bruggemans, chief economist of FNB.
The time to buy durable goods index actually improved marginally from -5 to -4.
“The reasons why this index remained virtually unchanged could be many consumers’ expectation that their own finances are shielded from these adverse economic developments and news reports that the interest rate is unlikely to increase in the near term future.
“There is even a chance that the interest rate could decline,” FNB/BER said.
Bruggemans said that in the past 12 months, white consumers’ confidence dropped the most, from +10 to -10.
This was nearly three times more than black consumers, whose confidence dropped from +20 to +12.
“Three out of four income groups adjusted expectations downward, the highest incomes from +21 to +5 and the lowest incomes from +5 to -2,” he said.
However, the high-middle income group, with a monthly income of R5 000 to R10 000, reflected “surprisingly durable” confidence which even increased in the third quarter of 2011.
“Many public servants in protected employment and enjoying good salary gains fall into this group, as do many unionised workers enjoying high real wage gains,” Bruggemans said. — Sapa