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Consumers will cut back on shopping and eating out and increasingly look to work from home in a bid to cut costs after the latest fuel price increase, according to First National Bank.
In an assessment of the effect of Tuesday’s fuel price hike, John Loos, senior economist: commercial property finance at FNB said demand for office space was also likely to be affected.
The latest prices announced by the department of mineral resources & energy follow record increases in June and have made fuel about 50% more expensive that it was a year ago.
“In terms of tenant demand for office space we remain of the belief that these ongoing high petrol prices militate against daily office working and in favour of greater working from home as employees try to curb fuel bills,” Loos said.
“This comes on top of an already elevated work-from-home level compared with prior to lockdowns and could persuade more companies to reduce office space requirements in the near term, thus putting further upward pressure on office vacancy rates.
“The fuel price is also expected to be a constraint for retail property, with consumers reprioritising expenditures to afford fuel bills that can’t always be avoided.”
In March, department of mineral resources & energy deputy director-general Tseliso Maqubela told a parliamentary portfolio committee that working from home should be considered in the face of rocketing fuel prices.
“We need to go back and ask whether everyone needs to be driving if they can afford to, and have the tools of the trade, to work from home. These are things that have to be considered because we are in a war situation,” Maqubela said.
Loos said non-essential goods and services such as eating out, entertainment “and postponable expenditures such as clothing and footwear could all battle”
“Retail centres focused more on these [items] are likely to experience more pressure ... such centres often being the larger regionals, while smaller food and grocery-focused convenience centres may be less affected,” he said.
The fuel price hike has just made me want to hurl myself off a cliff. The lack of electricity. The more than R2.30 increase per litre. I'm done here. I can't with South Africa anymore.— MALFUNCTIONING 🏳️🌈 #DreadWolf (@nerinedorman) July 4, 2022
The fuel price hike has just made me want to hurl myself off a cliff. The lack of electricity. The more than R2.30 increase per litre. I'm done here. I can't with South Africa anymore.
“Most significantly it exerts upward pressure on consumer price inflation and is thus in part responsible for interest rate hiking which FNB expects to continue in the remainder of this year.”
Loos says higher interest rates are a “dampener for property demand” and he expects weaker commercial property demand in the second half of 2022.
The Automobile Association (AA) said this week’s the fuel price adjustment will hit embattled consumers hard and put extra pressure on an already struggling economy.
While pressure is building on the government to formulate a solution to the rising fuel costs, short-term relief, while welcome, was not sustainable, the AA said.
“We understand that government has little leeway in terms of international petroleum prices and the rand/US dollar exchange rate, which is why we have called, and will continue to press, for a review of the fuel price.
“There is a need to interrogate all the components of the fuel price to determine whether all these components are still necessary in the existing formula and to establish if the current calculations of these components are correct. The longer this review is not initiated the longer the country will wait for lasting solutions.”
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.