FNB/BER consumer confidence shows firm bias

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By Cees Bruggemans, Chief Economist FNB.

FNB/BER consumer confidence has improved minimally from +14 in 2Q2010 to +15 in the 3Q2010, effectively staying unchanged at this high level for three quarters now, but strongly up from +1 a year ago and much higher than the cyclical low of –4 two years ago.

Most remarkable about the 3Q2010 survey result is that South African consumer confidence remains in boom-time territory reminiscent of 2006-2007, and on a par with previous cyclical peaks in 1994, 1988 and 1980, hardly giving any impression of hard times.

This is not to deny that some of those expressing a lack of confidence may still be experiencing very hard times. Such consumers, however, don’t dominate this survey.

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Noticeable in this 3Q2010 survey are the strong gains in sentiment in certain specific market segments, and regarding specific questions asked of respondents.

White consumer confidence gained 9 points to +10, thus halving the gap with Black consumers who stayed at +20.

Especially noticeable about White Confidence was the gain in own financial prospects from +14 to +24, and whether now is an appropriate time to buy durable goods, improving from -23 to -10.

Though the latter sentiment at -10 is still negative, it is now well removed from the -33 of a year ago.

A thaw seems to have set in among White consumers regarding purchases of consumer durables which may now make further headway in coming quarters.

Though English-speakers kept their overall sentiment unchanged at +4 (not a very high level), it is again noticeable how strongly their own financial prospects improved, from +16 to +23.

The change for the better was even more noteworthy among Afrikaans-speaking consumers, who for many years were hardly the cheerleaders of the consumer pack.

Yet their overall confidence gained 9 points to +4, now on a par again with English-speakers. Also, Afrikaans-speakers upped their own financial prospects to a very strong +17.

Also, Afrikaans-speakers improved their confidence about now being a good time to buy durables, from -33 to -17, still negative but well up from the -40 of a year ago.

These same stories by and large repeated themselves among high-income consumers (earning over R10 000 monthly and a very important market segment for the retail and motor trades, and the building trade, if perhaps initially mostly only for additions and alterations).

High-income consumer confidence reached a cyclical high of +21. Especially noteworthy was the jump in confidence about own financial prospects from +28 to a very high +35. Also whether now is a good time to buy durables improved from -9 to +2 compared to -21 a year ago.

On a lighter note, it can also be reported that those notoriously cautious consumers (those aged over 50) improved their confidence further to -2 compared to -19 a year ago and -28 two years ago. On this score this age group is now at similar confidence levels as it was in late 2006 at the height of the last consumer boom.

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There was more movement elsewhere in the survey results, but these changes were by and large not of a nature to change the overall impression.

Yet the catch-up displayed by lagging White and Afrikaans-speaking consumers in particular should be noted, as should the sentiment gains in the high-income group, with this likely to have an important bearing on household consumption spending in the coming year.

Given the trends of the past 18 months, overall consumer confidence is expected to remain high in 4Q2010, with a high probability of cyclically gaining yet some more ground in 2011-2012 as rising incomes, improving asset values, lowered interest rates and reduced debt ratios start to tell more fully.

Source: Cees Bruggemans, First National Bank, September 13, 2010.

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