Picture: REUTERS
Picture: REUTERS

After a sharp drop in the first quarter 2019, consumer confidence picked up in the second quarter, given a slight boost by post-election optimism.

The consumer confidence index (CCI), compiled by FNB and the Bureau for Economic Research at Stellenbosch University, rose to five points in the second quarter from two in the first.

The latest reading is marginally above the long-run average reading for the index of two points since 1994, suggesting that a slight majority of consumers expect the outlook for the SA economy and their own household finances to improve over the next 12 months, FNB said on Wednesday.

The increase in the index during the second quarter was largely due to a rebound in the economic outlook sub-index. Whereas most consumers expected SA’s economic prospects to remain unchanged during the first quarter, a small majority of consumers now expect some improvement in the domestic economic outlook, according to FNB.

Consumer confidence had plummeted in the first quarter of 2019 to levels last seen during the last weeks of Jacob Zuma’s presidency. This is in stark contrast to the first quarter of 2018 when consumer sentiment soared to a record high of 26 after President Cyril Ramaphosa took over from Zuma. However, it remains higher than the depressed levels recorded between 2015 and 2017.

The first-quarter reading was hit by surprise load-shedding by Eskom, and fewer blackouts in the second quarter probably boosted sentiment among some consumers, FNB chief economist Mamello Matikinca-Ngwenya said on Wednesday.

“More importantly, the opportunity to vote in SA’s sixth democratic election since the end of apartheid most likely buoyed consumers’ hopes for the future, as has typically been the case in previous general elections,” she said.

However, household budgets are expected to continue to be constrained by higher income taxes, higher fuel and electricity prices, and rising unemployment rates.

Said Matikinca-Ngwenya, “Consumers have been taking on more credit as financial pressures mount, but it is unlikely that the modest uptick in credit extension will be sufficient to underpin household consumption amid dwindling real disposable income growth.”