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South Africa’s electricity supply woes and deepening cost of living concerns have sent consumer confidence plunging to levels last seen in the third quarter of 2020, during a time when economic activity was stalled by Covid-19 lockdowns.

The quarterly Consumer Confidence Index (CCI) that measures the mood of consumers in South Africa, dropped to -23 for the first quarter of 2023, FNB and the Bureau for Economic Research (BER) said on Thursday.

This is the third lowest CCI reading on record since 1994.

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The sharp decline in confidence in the first quarter of 2023 follows the CCI showing a recovery in the previous quarter (Q4 2022), when the index bounced back to -8, from -20 in the third quarter of 2022.

FNB chief economist Mamello Matikinca-Ngwenya said the alarming increase in power outages since December, in part battered consumer confidence.

“The concomitant deterioration in South Africa’s economic prospects no doubt rocked consumer sentiment during the first quarter.

“Spiralling food prices, another interest rate hike and a sharp depreciation in the rand exchange rate likely added insult to injury. However, further job creation in the still-recovering services sector may have softened the blow to low- and middle-income confidence,” she said.

“The about-turn in consumer confidence points to a marked decline in consumers’ willingness to spend and foreshadows a significant slowdown in real consumer spending growth relative to the surprisingly strong rate recorded during the fourth quarter,” she added.

At these levels, consumer confidence is in line with the weak sentiment that prevailed in the third quarter of 2020, when the South African economy contended with level 3 Covid restrictions, alcohol bans, school closures and curfews, FNB said.

The CCI reading is also close to levels seen during the second quarter of 2022, when KwaZulu-Natal experienced deadly floods and the economic impacts of Russia’s war in Ukraine started to manifest. – Moneyweb

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FNB said at -23, the latest CCI “is indicative of extreme concern among consumers about South Africa’s economic prospects and their household finances”.

All three sub-indices of the CCI – the economic outlook, household financial outlook and the suitability of the present time to buy durable goods – declined dramatically during the first quarter of 2023.

Further deterioration expected

FNB said a vast majority of consumers expect economic growth to deteriorate over the next 12 months and view the present time as highly inappropriate to make big-ticket purchases such as vehicles, furniture, household appliances and electronic goods.

It noted that the household financial outlook sub-index, fell 14 index points to -1, reversing the gains it made during the 2022 festive season.

“While consumers no longer expect their household finances to improve over the next year, they are nevertheless considerably less pessimistic about their own financial prospects compared to their gloomy expectations for the economy in general,” said FNB.

The outlook for household expenditure among high-income earners declined the most, which Matikinca-Ngwenya said is doubly alarming, as the group is represented by affluent consumers who have the greatest spending power.

“With an increasing number of high-income households now investing (at considerable cost) in solar power and other backup power systems, these households will in all likelihood need to slash their discretionary spending in order to balance their budgets. Consequently, sales volumes of big-ticket durable goods items such as new vehicles, furniture and household appliances are likely to face increased pressure in coming months,” she said. Moneyweb