The Consumer Confidence Index added 3 index points in Q1 to -9, FNB said on Tuesday. It has been rebounding since Q2 of last year, when the hard lockdown imposed to slow the spread of Covid-19 saw it collapse to a 35-year low of -33. 

The index remains mired in negative territory and is well below its average of +2 since 1994. 

The sub-indices that comprise the index paint a decidedly mixed picture of consumer confidence. The economic outlook index rose 7 points to -5, while the household financial outlook component maintained a steady climb in positive territory, adding 4 points to +10.  

“However, the sub-index measuring the appropriateness of the present time to buy durable goods (e.g. vehicles, furniture, household appliances and electronic goods) slipped back from -30 to -32 index points during the first quarter of 2021,” FNB said. This indicates that consumers, especially those in the higher-income brackets, are still holding off on the purchase of big-ticket items. 

Indeed, the confidence level of high-income consumers – those in households earning more than R20,000 a month – remains the lowest. It crept up just 1 point to -15. 

By striking contrast, the confidence level of low-income consumers, or those drawn from households subsisting on less than R2,500 a month, rose from -4 to zero. 

Those from the middle-income bracket saw a bounce in consumer confidence to -7 from -13. It must be said that the middle classification includes households on incomes ranging from R2,500 to R20,000 a month, so it should not be misread as a measurement of middle-class sentiment. 

“Unlike low- and middle-income consumers, high-income households are still very concerned about the outlook for the South African economy, and are also considerably less optimistic about their financial prospects over the next 12 months. Consumers across all income groups consider the present time as highly inappropriate to purchase durable goods,” FNB said. 

One worrying sign here is that the 300 basis points’ worth of interest rate cuts made by the central bank last year are clearly having a muted effect, if consumers are still thinking twice about buying durable goods, which are the kind that would often be purchased on credit. 

Commenting on the data, FNB chief economist Mamello Matikinca-Ngwenya said, “A range of positive developments in all likelihood supported the sustained recovery in consumer confidence during the first quarter, including a sharp decline in Covid-19 infection rates since the peak of the second wave in early January; the extension of the Social Relief of Distress (SRD) grant and Temporary Employer/ Employee Relief Scheme  (TERS) through the end of April 2021; higher-than-inflation adjustments to personal income tax brackets, soaring stock prices on the JSE; and a recovery in employment – albeit muted – as the South African economy continues to mend.”

And there is no guarantee of another bounce in the next quarter. 

FNB noted that for the low-income bracket, rising petrol and paraffin prices, and the spike in sin taxes on booze and tobacco, would soon bite into household incomes, while the expiry of the SRD grant and TERS programme at the end of April will also hit them hard. 

Politics also seem to be at play here. The concerns by upper-income households about the direction of the economy is surely, at least in part, a reflection of their lack of confidence in the ANC government’s ability to deliver on structural reforms or fix Eskom’s massive problems. 

The lower-income brackets, which comprise the ANC’s main political base, have more faith in the economic outlook and by extension the party’s ability to deliver. But that could also sour in the months ahead. DM/BM