Consumer confidence slides in first three months of 2020
Economists believe sentiment could plunge further in SA given concerns on the spread of Covid-19
Consumer confidence fell further at the start of 2020, as SA’s already rocky start to the year soured on the back of the global ramifications of the coronavirus.
The FNB/BER consumer confidence index (CCI) fell to -9 index points in the first quarter of the year, but economists believe sentiment could slide further as SA announced drastic measures to curb the spread of the virus — including the closure of schools as from Wednesday.
The CCI's decline was driven by a fall in the time-to-buy durable goods subindex, which measures consumers’ views of the appropriateness to buy items such as vehicles, furniture and household appliances. This index fell to a 33 year low of -26 in the first quarter of 2020, according to a statement from FNB.
The subindex measuring consumer’s economic outlook for the next 12 months also deteriorated further, falling from -14 to -16 in the first quarter.
Ahead of the print, expectations were for a decline to -10 according to a Bloomberg survey of four economists. The index is a measure of households’ confidence in the economy and sentiment regarding their financial position. The neutral mark for the index is considered to be +2.
FNB chief economist Mamello Matikinca-Ngwenya noted the sharp deterioration in sentiment particularly among high income earners. Confidence levels among high-income households, earning more than R20,000 per month, fell from -4 to a 20-year-low of -17.
“High-income consumers now appear to be particularly attuned to SA's grim economic reality, and consumers in general are signalling that they will postpone their durable goods purchases as much as possible,” she said in the release.
SA's already rather bleak economic prospect deteriorated even further at the start of 2020 she noted, mainly on the back of the negative effects of the coronavirus on the global economy.
Investec’s Annabel Bishop warned in a note that, with the likely spread of Covid-19, “SA is likely to see a further fall in the perceived appropriateness of buying durable goods” in the second quarter, and as such consumer confidence is at risk of falling further.
The outlook for the domestic economy has worsened on the Covid-19 pandemic, she said and Investec is now forecasting 0.1% for SA’s economic growth in 2020. This will “negatively impact household finances, and so further suppress consumer confidence in 2020,” she added.
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