This time, the consumer confidence level of low-income consumers is higher than that of consumer who earn a higher income.
The slight increase in consumer confidence in the third quarter was welcome, but the numbers are still lagging behind the levels achieved in 2024. There are also no indications that the fourth and final quarter of the year will be any better.
The FNB/BER Consumer Confidence Index (CCI) retreated from -10 to -13, and although the reading of -13 is still above the extraordinarily weak first-quarter reading of -20, when a confluence of adverse developments hit consumer sentiment, the consumer confidence index drifted even further below the relatively positive readings recorded during the second half of 2024.
In addition, the two-point decline in the overall consumer confidence to -13 means that consumer sentiment moved even further south of the average reading of -1 since 1994, signalling a slowdown in real household consumption expenditure growth during the third quarter.
The deterioration in consumer confidence during the third quarter can largely be ascribed to a marked decline (from -7 to -16) in the confidence levels of middle-income households, Mamello Matikinca-Ngwenya, chief economist at FNB, says.
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Deteriorating household finances and economic outlook cause fall in consumer confidence
The third-quarter decline in consumer confidence can be attributed to a deterioration in the household finances and economic outlook sub-indices of the index. The economic outlook sub-index slumped from -18 to -22 index points, while the household finances sub-index fell from 9 to 3 index points.
However, supported by another 25-basis-point cut in the prime interest rate and an appreciation in the rand exchange rate, the sub-index measuring the appropriateness of the present time to buy durable goods edged up from -21 to -20. The time-to-buy-durables index is the only sub-index that is currently at a higher level compared to the same quarter a year ago.
A breakdown of the consumer confidence index per household income group shows an alarming deterioration, from -7 to -16 index points, in the confidence levels of middle-income households earning between R5 000 and R20 000 per month.
The confidence levels of high-income households earning more than R20 000 per month remained unchanged at -11 index points, while that of low-income households earning less than R5 000 per month rebounded from -15 to -9 index points.
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Surprising uptick in consumer confidence among low-income earners
Matikinca-Ngwenya says the uptick in low-income confidence is somewhat surprising given the sharp increase in food inflation in recent months, which typically has a disproportionately negative impact on the purchasing power of less affluent consumers.
“However, above-inflation increases in social grants are likely helping low-income households to make ends meet. Furthermore, the improved third quarter reading for low-income confidence also compares to a particularly weak second quarter, when more than a hundred people lost their lives in the Eastern Cape floods.”
The latest inflation release from Statistics SA shows that food inflation accelerated from 1.5% year-on-year in January to 5.2% by August, while social grant increases of between 5.7% and 5.9% were confirmed in the May 2025 budget. Job growth of 19 000 (0.1% in the third quarter) remained poor during the second quarter.
Matikinca-Ngwenya notes that while two-pot retirement system withdrawals likely faded during the third quarter and higher personal income taxes started to bite, another 25 basis point interest rate cut brought welcome debt service cost relief to more affluent consumers.
“The strong performance of share prices on the JSE and the appreciation in the exchange rate of the rand may also have underpinned the confidence levels of high-income households. In contrast, weak job creation, rising inflation and dwindling two-pot funds have likely started to weigh on the confidence levels of the middle class.”
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Consumer spending and consumer confidence
She says the growth in real consumer spending moderated from a remarkable 3.2% during the first quarter of 2025 to a still sturdy 2.8% in the second quarter. “The fact that the confidence levels of high-income households remained unmoved during the third quarter can be seen as fairly positive for the retail sector, as this income group has the greatest spending power.
“Coupled with the slight further improvement in the time-to-buy durable goods sub-index of the consumer confidence index, this suggests continued support for durable goods sales and high-end retail stores during the third quarter.”
However, she warns, increasing inflation, shrinking two-pot retirement system payouts, and waning consumer confidence will likely translate into a more pronounced slowdown in real household expenditure growth towards the final quarter of the year.
“In the absence of further interest rate cuts and a bounce-back in job creation, higher food inflation will erode the purchasing power of middle- and low-income consumers in particular.”
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We still have to feel the impact of 30% US tariff – consumer confidence could fall further
Jee-A van der Linde, senior economist Oxford Economics Africa, says the decline in consumer sentiment comes at a time when inflation is trending higher and the South African Reserve Bank recently paused its cutting cycle.
“We maintain that, while households will remain a key driver of overall economic growth this year as retail trade sales surged into the third quarter, real consumption growth is likely to moderate going forward.
“The economic impact of the 30% US import tariff will become more pronounced and should start to show in upcoming data releases. We have already seen the unemployment rate tick up to 33.2% in the second quarter, with companies likely to remain reluctant to hire given the uncertain economic environment. The latest sentiment data suggests little reason to expect a meaningful improvement in demand conditions.”
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Drop in consumer confidence signals caution about SA’s economic growth recovery
Sanisha Packirisamy, chief economist at Momentum Investments, says the drop in consumer sentiment signals caution over the extent of South Africa’s economic growth recovery. She warns that weak consumer confidence dampens household spending and consequently, gross domestic product (GDP) growth.
“Confident consumers are more willing to spend and borrow, boosting household consumption, which is the largest component of GDP in most economies. While we acknowledge that economic growth also depends on structural, policy and external factors, higher consumer confidence remains particularly important for us, given that household consumption accounts for more than 60% of GDP.”
She says boosting confidence can therefore have a significant impact on overall economic growth. Key areas which could boost consumer confidence include service delivery improvements, employment creation, stable income, cost of living control and political and policy uncertainty
“Our household consumption expenditure estimate is slightly lower at 1.7% in 2025 (previously 1.8%), and we expect the economy to expand by 1% in 2025.”
