Home South African Consumer confidence tumbles as economic outlook sours – FNB

Consumer confidence tumbles as economic outlook sours – FNB


Having already slipped from -9 to -13 index points during the first quarter of 2022, the FNB/BER Consumer Confidence Index plunged to -25 in the second quarter of 2022.

File picture: Nokuthula Mbatha/African News Agency (ANA)

HAVING already slipped from -9 to -13 index points during the first quarter of 2022, the FNB/BER Consumer Confidence Index (CCI) plunged to -25 in the second quarter of 2022.

Bar the CCI reading of -33 in the second quarter of 2020 – when the sudden outbreak of the Covid pandemic and subsequent implementation of the Level 5 lockdown pummelled sentiment – the current reading is the lowest in more than three decades. Whereas official data shows that the growth in real consumer spending remained robust (3.2% year-on-year) during the first quarter of 2022, the dramatic deterioration in consumer sentiment now signals a marked slowdown in consumer spending in coming months.


The remarkable collapse of the CCI during the second quarter of 2022 can be ascribed to a major deterioration in the economic outlook sub-index of the CCI (from -18 to -39) and a complete turnabout in the household financial prospects sub-index (from +8 to -5). The index measuring the appropriateness of the present time to buy durable goods (e.g. vehicles, furniture, household appliances and electronic goods) also edged down (from -28 to -32), indicating that consumers consider the present as an inappropriate time to purchase durable goods.

A more detailed breakdown of the CCI shows that, while consumer confidence fell notably across all income groups, high-income confidence has soured more than low-income confidence since the end of 2021. Having already slumped from -11 to -18 index points in the first quarter, the confidence level of high-income households (earning more than R20,000 per month) crashed to -30 in the second quarter.

This reading is only 3 index points north of the historic low of -33 recorded for this sub-index in the second quarter of 2020, with the vast majority of affluent households now anticipating a deterioration in their household finances and, in particular, in South Africa’s economic growth rate. Similarly, the confidence level of middle-income households (earning between R2,500 and R20,000 per month) slumped from -11 to -23, while low-income confidence (consumers earning less than R2,500 per month) declined from -6 to -16 index points. Although consumer sentiment is now very depressed across all three income groups, affluent consumers are considerably more downbeat compared to low-income households.

January, the consumer price inflation rate breached the 6% upper range of the SA Reserve Bank’s target for the first time in five years and the prime interest rate has been hiked by 75 basis points since the start of the year. Whereas spiralling food and fuel prices are probably of primary concern to less affluent households, the prospects of further steep interest rate hikes and sinking share prices on the JSE would have compounded the inflationary pressures when it comes to middle- and high-income households.”

Mamello Matikinca-Ngwenya, the FNB chief economist said, “The non-payment of the R350 per month social relief of distress (SRD) grant to 10.6 million South Africans in April and May in all likelihood also weighed on the confidence levels of many low-income households. However, a substantial improvement in job creation in recent months and Sassa’s commitment to resume the SRD grant payments at the end of June – as well as to catch-up all missed payments from July – probably prevented an even more pronounced decline in low-income confidence during the second quarter.”


Although consumer sentiment was widely expected to weaken further given the worsening inflation and interest rate outlook, the extent of the drop in consumer confidence is alarming. Save for the panicked Level 5 lockdown period during the initial outbreak of the Covid pandemic in SA (2020Q2, when confidence nosedived to -33), the FNB/BER CCI is now at its lowest level in 35 years. While household consumption expenditure still surprised on the upside in the first quarter of 2022, the dramatic deterioration in confidence points to a sudden slump in consumers’ willingness to spend and foreshadows a significant slowdown in real consumer spending growth relative to the strong first quarter.

Even though consumers are likely to tighten their purse strings, the surprisingly large fall in the CCI could signify somewhat of an overreaction to recent developments and may not translate into an equally large contraction in consumer spending.

Matikinca-Ngwenya noted that “Positive developments such as the scrapping of all remaining Covid-19 regulations – including the wearing of masks, limits on gatherings and border checks – a gradual recovery in job creation and the back payment of missed SRD grants could counter some of the mounting inflationary and interest rate pressures. Savings accumulation among affluent consumers over the last two years should also underpin spending by high-income households. Nevertheless, the combination of soaring food and fuel prices and increased wariness among consumers will no doubt see a realignment of consumer budgets. Households will likely start to draw on savings and slash their discretionary spending – especially on big-ticket durable goods – to buttress purchases of basic necessities and support the recovery in spending on clothing, restaurants, recreation and entertainment following the lifting of Covid restrictions.”


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