Ina Opperman

By Ina Opperman

Business Journalist


SA festive season consumer confidence lowest in two decades

The low consumer confidence index (CCI) score at the end of 2023 shows consumers are dispirited heading into the festive season.


South Africa’s festive consumer confidence is the lowest in two decades, showing how low the country’s consumers are on festive cheer, with the Consumer Confidence Index (CCI) decreasing further to reach -17 in the fourth quarter of the year.

The FNB/BER CCI recovered from -25 index points during the second quarter to -16 in the third quarter but slipped to -17 points in the fourth quarter.

The deterioration in the CCI is attributed to a quarterly decline in the economic outlook subindex, while the household financial outlook measure and the index measuring the appropriateness of the present time to buy durable goods improved modestly in the fourth quarter, although households remained averse to spending on big-ticket discretionary goods.

The CCI for the fourth quarter is even below the reading of -12 recorded during the fourth quarter in 2020 during Covid-19, suggesting that consumers will keep tight control over their purse strings during the holiday shopping season, which should worry retailers of expensive luxury goods in particular.

A breakdown of the CCI per household income group shows high-income households earning more than R20 000 per month and middle-income households earning between R5 000 and R20 000 per month were more disheartened in the fourth quarter, with the CCI down two index points for both groups.

However, low-income households earning less than R5 000 per month were somewhat less pessimistic about their financial prospects and South Africa’s economic outlook. This is partly due to the fact that lower-income groups are less sensitive to interest rate developments compared to affluent households.

ALSO READ: Consumer confidence recovers some lost ground, but still negative

Why is consumer confidence higher among low-income groups?

“Sustained strong job growth heading into the festive season, especially in the tourism sector, may have countered the adverse impact of cost-of-living pressures on low-income households in general. The announcement that the Social Relief of Distress (SRD) grant will be extended through March 2025 probably also buoyed the confidence of the 8.6 million SRD grant recipients,” Mamello Matikinca-Ngwenya, chief economist at FNB, says.

However, high interest rates and a marked deterioration in South Africa’s fiscal position are likely worrying high and middle-income consumers. In its November MTBPS, National Treasury said it would introduce additional measures to increase tax revenue and cut real government spending in 2024, which will adversely affect the disposable income of high- and middle-income consumers in particular, she says.

“It is also instructive to note how much more pessimistic households are about the outlook for the national economy compared to their own household’s perceived financial prospects. Although the vast majority of households (especially wealthy consumers) are pessimistic about the outlook for the economy, a small majority of households (especially less affluent consumers) expect their household finances to improve over the next year.”

She points out that the average reading for the economic outlook sub-index of the CCI, which started in 1994, is 11 points lower than the average reading for the household financial prospects index (+11).

“However, the reading for the economic outlook index is a massive 31 index points lower than the household finances index. The gap between these two sub-indices widened again in the fourth quarter and is especially large for high-income households at 38 index points.”

Matikinca-Ngwenya notes that this suggests, to an extent, that consumers acknowledge the adverse implications that factors like high levels of load shedding, Transnet’s logistical constraints and a tightening in fiscal policy hold for economic growth in South Africa.

“However – rightly or wrongly – they do not expect flagging economic growth to lead to an equivalent deterioration in their own financial positions.”

ALSO READ: Financial stress eats away at consumer confidence

What does the low festive season consumer confidence mean?

The low festive season consumer confidence reading signals that consumers are not in a jolly, high-spending mood. Sales of big-ticket discretionary goods and especially interest-rate sensitive goods, will likely underperform relative to previous holiday shopping periods.

However, the fact that the low CCI reading largely stems from consumers’ very negative perceptions about the outlook for the national economy and to a lesser extent from pressure on their household finances, offers some hope that the all-important Christmas gift-giving period will not be a complete whitewash for retailers.

“Essentials, value-for-money products and affordable luxuries will likely be at the top of consumers’ holiday shopping lists,” Matikinca-Ngwenya says.

Jee-A van der Linde, senior economist at Oxford Economics Africa, says the consumer confidence data for the fourth quarter shows that businesses and consumers are battling a challenging economic environment.

“By all appearances, households seem to have more confidence in their own financial situations than the outlook they have for the floundering South African economy. While the government scrambles to address supply-side issues, conditions are not expected to improve meaningfully over the coming months as inflation will remain high and monetary policy tight. Uncertainty about next year’s elections will likely weigh on both consumers and investors’ minds.”

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