Consumer confidence still low as recession batters SA
South African consumers remain pessimistic about the country’s economic prospects, a leading indicator shows.
The latest reading of the First National Bank (FNB)/Bureau for Economic Research consumer confidence index shows sentiment among consumers remained depressed in the first half of the year.
Consumers were most affected by the recession and downgrades to SA’s sovereign credit ratings.
Low consumer confidence correlates with weak spending among households.
FNB senior economic analyst Jason Muscat said: “Bar a swift, confidence-inspiring change to SA’s current political landscape, consumer spending is likely to remain depressed during the remainder of 2017.”
Old Mutual Investment Group economic strategist Rian le Roux said at a media briefing in Sandton on Wednesday that SA urgently needed a recovery in confidence to avoid a deep structural decline.
“In the absence of a material recovery in business, investor and consumer confidence, SA is at risk of getting trapped in a protracted period of weak growth and further social and fiscal pressures,” Le Roux said.
Despite the grim picture, Le Roux is expecting a stronger second quarter based on the economic data released so far.
Manufacturing contracted slightly in May, although it had shown improvement in the three-month period ending in May. Retail increased in April, despite the recession.
Capital Economics economist John Ashbourne said despite recent shocks, the fall in consumer confidence was “pretty limited”.
“Most consumers remain gloomy, but the much feared ‘Gordhan shock’ does not seem to have caused them to significantly re-evaluate their appraisal of the economic situation.”
Despite the string of political scandals and shocks in 2017, consumer confidence was higher in the second quarter of 2017 than it was over most of 2016, Ashbourne said. This “supports our view that the worst is over for the country’s troubled economy”.