Consumer confidence remains high
Strong income growth and rising employment in poor households proved to help consumer confidence in South Africa peak after the second quarter of this year.
Rising interest rates and the tough new credit rules that were introduced last month could have an effect on healthy consumer demand but continued strong household income growth will support consumer spending.
An index compiled by First National Bank and the Bureau for Economic Research showed that consumer confidence declined to +21 between April and June this year from a peak of +23 in the previous three months. FNB chief economist Cees Bruggemans described this fall as “insignificant”. He says that consumer demand is the main engine of faster economic growth and that there are households benefiting from new employment opportunities and government spending activity.
Confidence among households earning less than R800 a month jumped to +20 from +15, which is its highest level in the past ten years. Confidence in low middle-income groups earning between R800 and R4000 a month was also up by one point, to +20.
Confidence in top income groups (earning more than R8000 per month), fell from +25 to +20 while the income groups earning between R4000 and R8000 saw a decline in confidence from +25 to +19. Bruggemans believes that a reason for this might be the fact that the petrol prices have gone up by 19% so far this year. Strong share and housing markets prevented a more pronounced decline in these groups’ confidence according to Bruggemans.
The survey showed that growth in spending came down from 7.75% in the final quarter of last year to 7.5%.
The survey took place between May 14 and June 2, which means that it does not reflect the latest rise in interest rates on 7 June or the effect of the National Credit Act.
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