SA consumer confidence plunges

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By Kevin Lings

The FNB/BER consumer confidence index, which was released today, fell significantly in Q1 2008 to +12 from +22 in Q4 2007. This is the lowest level of consumer confidence since the end of 2004 and a very substantial decline q/q. More positively, while the index is well below the peak at the start of 2007, it remains above the long-term average of a mere 1.8 index points, suggesting that overall confidence remains positive.

The decline in confidence in Q1 is not that surprising given the relatively high interest rates, higher food inflation, increased debt-servicing costs, slowing house-price growth and the electricity outages. Furthermore, we would expect confidence levels to fall further during the year considering the slowdown in the domestic economy and the worsening of employment conditions.

Over the past couple of years as confidence moved noticeably higher, there was a high degree of uniformity in confidence levels measured between different race groups, language groups and income groups. Unfortunately, this has changed to some extent. For example, the confidence level amongst the white population has dropped from a high of 16 index points in Q1 2007 to the current level of only -1 index points. In contrast, the confidence level within the black population remains relatively high at +18, although this has also dropped significantly from +30 in Q4 2007.

Attached are charts that provide a breakdown of consumer confidence by different groups:

• Males are generally more confident than females
• Afrikaans-speaking people have relatively low confidence levels, while Sotho-speaking people have higher confidence levels
• Blacks have a higher confidence level than whites
• Higher-income earners have a slightly higher confidence level than low-income earners
• All confidence levels fell in Q1 2008

Importantly, there is a reasonably close relationship between consumer spending and consumer confidence, which points to further downward pressure on consumer activity.

The FNB/BER consumer confidence index is derived from 2 500 personal at-home interviews. The surveys cover blacks and whites in metropolitan areas, cities, towns and villages throughout South Africa. The consumer confidence index reveals the change in consumers’ expectations. The index has fluctuated between -36 (indicating an extreme lack of confidence) and +23 (indicating extreme confidence).

Source: Kevin Lings, Stanlib, April 8, 2008.

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