Consumer confidence slumped to its worst levels in 35 years, during the second quarter of 2020 as households grappled with the economic fallout of the phased lockdown restrictions, imposed to slow the spread of the coronavirus.

The FNB/BER consumer confidence index (CCI) plummeted to -33, a low not seen since 1985 when then president PW Botha delivered his Rubicon speech amid resistance to the apartheid regime and the gauge hit -36, the bank said in a statement about the data.

Collapsing consumer confidence mirrors that of business confidence, which also fell to its lowest level on record in the second quarter. 

The CCI result was worse than expectations of a reading of -22, according to a Bloomberg survey of five economists.

The decline in consumer sentiment was in part due to steep falls in the household finances and time-to-buy durable goods sub-indices.

The household financial outlook sub-component, fell from +14 to -13 points in the second quarter, indicating that the majority of households across all income groups now expect their household finances to deteriorate over the next 12 months, according to FNB.

The time-to-buy durable goods index, which measures consumers’ views on when it is appropriate to buy goods such as cars, household appliance or furniture, collapsed to its lowest level on record, declining to -64.

“The sharp deterioration in the financial prospects index of the CCI and the complete collapse in the time-to-buy durable goods index suggest that the Covid-19 pandemic and ensuing economic restrictions had a materially negative impact on both consumers’ ability and willingness to spend,” FNB chief economist Mamello Matikinca-Ngwenya said.

A breakdown of sentiment across household income groups revealed that low-income consumers, or those earning less than R2,500 a month, showed the largest decline in confidence; followed by middle-income households earning between R2,500 and R20,000 a month.

This suggested that efforts by the government to support vulnerable households, through extended grant relief during the health crisis, did not fully compensate for the pandemic’s hit to household income, according to FNB.

“Unlike affluent households, low-income ones typically have little savings to fall back on during times of financial hardship and therefore experienced a fairly immediate and significant deterioration in their quality of life when the lockdown commenced,” said Matikinca-Ngwenya

The second-quarter survey was conducted between June 1 and 12, covering the first few days after most retail outlets were allowed to reopen and SA switched from level 4 restrictions to the less onerous level 3.

But, given the uncertain outlook for the economy and intense pressure on household budgets, neither deep discounts offered by retailers, nor substantial interest rate cuts by the Reserve Bank enticed consumers to buy durable goods, Matikinca-Ngwenya said.

Since the advent of the pandemic the Reserve Bank has cut the benchmark interest rate to a historic low of 3.75% to provide relief to households and businesses.


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