South Africa’s consumer confidence index (CCI) declined sharply in the second quarter of 2020 to lowest level since 1985, according to First National Bank’s (FNB) Bureau for Economic Research survey report released on Tuesday.
The report said the CCI slumped to minus 33 points in the quarter after registering minus 9 points in the first quarter.
The sharp deterioration is only three index points shy of the all-time lowest consumer confidence level of minus 36 recorded in 1985, a year when the country witnessed violent resistance against apartheid and a partial state of emergency, the survey showed.
Mamello Matikinca-Ngwenya, Chief Economist at FNB, said that most households “across all income groups” were expecting their finances to continue declining for another year.
“The sharp deterioration in the financial prospects index of the CCI and the complete collapse in the time-to-buy durable goods index suggest that the COVID-19 pandemic and ensuing economic restrictions had a materially negative impact on both consumers’ ability and willingness to spend,” she said.
She said millions of workers were placed on unpaid leave, while others had their salaries reduced which affected households income.
The report stated that the deteriorating economy which in turn impacted household finances meant that consumers were not prepared to spend on durable products such as vehicles, furniture and jewellery.
“Not even the cut-price specials offered by durable goods retailers or the substantial interest rate cuts by the South African Reserve Bank seem to be enough to entice consumers to spend their money on durable goods or expensive luxuries,” Matikinca-Ngwenya said.
The Reserve Bank cut the repo rate by 275 basis points since January this year.
Matikinca-Ngwenya said due to households’ unwillingness to spend on durable products, it might be a long and painful recovery for retailers specializing in these goods.
“Given the extent of the blow to consumer income and confidence, as well as the fact that coronavirus infections are now rising faster than ever before in South Africa, the retail sector is still a long way away from firing on all cylinders,” she added.
South Africa imposed the lockdown in March and key sectors of the economy began re-opening in June. Enditem