The Grinch looks set to steal the annual Christmas bonanza from South Africa’s retailers this year. 

The FNB/BER Consumer Confidence Index (CCI) slipped to -17 in Q4 from -16 in Q3. This is its lowest festive season reading in over two decades. Pointedly, it is below the -12 level that was obtained in Q4 2020, when the economy was still groaning under the weight of Covid-19 restrictions. 

“This suggests that consumers will keep tight control over their purse strings during the holiday shopping season, which should worry retailers of expensive luxury goods in particular,” FNB said. 

The one silver lining is that the index is above the -25 level recorded in Q2, but that is little comfort to retailers facing the lowest confidence levels in over two decades at this crucial time of the year.

Interestingly, consumer confidence among high-income and middle-income households — the ones that account for most spending — declined further, while confidence on this front among the poorest households edged up.

“A breakdown of the CCI per household income group shows that the confidence levels of both high-income households (earning more than R20,000 per month) and middle-income households (earning between R5,000 and R20,000 per month) declined by 2 index points,” FNB said.

“In contrast, the confidence of low-income households (earning less than R5,000 per month) edged up by 3 index points. With a CCI reading of -13, low-income households are slightly less pessimistic about the outlook for the national economy and their own household finances compared to more affluent consumers.”

Pessimism is especially pronounced regarding the outlook for the national economy. The reading of this sub-index sank further into negative territory, falling to -28 in Q4 from -22 in Q3. This is a massive 31 points below the household financial outlook index, which crept up to 3 from -1. 

For high-income households, the gap is a glaring 38 points. 

This collapse of confidence about the outlook for the national economy is hardly surprising given the many crises that are currently unfolding in South Africa: the power crisis, the logistics crisis, the crime crisis, the policy crisis, the cost-of-living crisis, the bird flu crisis, the water supply crisis — the crisis list is longer than any Christmas shopping list in these tough times.

High interest rates are also clearing a constraint on consumer confidence, and inflation remains stubbornly high at 5.9%. 

This lack of confidence — or abundance of pessimism — is also the latest sign that South Africa’s economy may have fallen into a recession after contracting 0.2% in Q3 on a quarterly basis. 

A recession will certainly take the glow off the festive season, and that bodes ill for retailers who are battling to contain costs as they burn diesel and install solar panels to keep the lights on. The Grinch is indeed on the prowl this season. DM