Consumer confidence hits a low

2011-01-27 09:24

Consumer confidence is at its lowest level since 2004, according to an index released today.

“This is the fifth consecutive decline in consumer confidence since January 2009 and is the lowest score recorded since the survey was first conducted in 2004,” said MasterCard Worldwide on the release of its index of consumer confidence.

Released twice a year, it is based on a survey which measures consumer confidence on expectations in the market for the next six months based on five indicators: economy, employment, stock market, regular income and quality of life.

A score of zero is the most pessimistic, 100 the most optimistic and 50 neutral.

The latest score is 54.7, which is down from 58.6 six months ago.

“The latest score is also well below South Africa’s historical average of 73.6 – however, it remains in positive territory (a score of 50 and over is optimistic),” said MasterCard.

“While it is certainly encouraging that the latest index figure for South Africa remains in optimistic territory... it is a point of concern that the index has dropped to its lowest level since its inception in 2004,” said independent economic advisor Roelof Botha.

Between the end of the third quarter and beginning of the fourth quarter of last year South Africa experienced slower economic growth and general weakness in a number of key economic indicators, after the tourism euphoria of the World Cup had ended.

“Furthermore, the third quarter of 2009 witnessed a welcome return to positive real GDP (gross domestic product) growth, after a recession that lasted a mere three quarters in South Africa.

“However, since rising to a healthy 4.6% during the first quarter of 2010, GDP growth became somewhat subdued, declining to rates of 2.8% in the second quarter and 2.6% in the third quarter of 2010.”

Confidence levels improved in Johannesburg and Cape Town compared to mid-2010.

However, the level dropped sharply in Durban, going from 51.3 to 34.3 over the six months.

“If one was to take Durban’s pessimistic score out of the overall consumer confidence score, the survey results and thus consumer confidence would have improved over the last six months,” said Botha.

“The most plausible explanation for the divergence between the three cities covered by the survey is the relative scarcity of tourism activity that inevitably followed the World Cup extravaganza.”

KwaZulu-Natal has the second-highest number of agricultural workers and this sector was particularly hard-hit by the strong rand and uncertainties about land reform, he said.

“The negative sentiment in Durban is also related to the fact that 79% of the economy’s total job losses between September 2009 and September 2010 occurred in KwaZulu-Natal.

“Many of these jobs were lost as an indirect result of the strong rand, which has inhibited exports and depressed the demand for locally manufactured goods.”

Botha expected confidence to improve in 2011.

“I expect that by mid-2011, the next phase of government’s ambitious long-term programme for infrastructure creation, combined with relatively high prices for commodity exports; a stable and hopefully marginally weaker exchange rate; a benign inflation environment; and the existence of the lowest interest rates in almost four decades should ensure a more positive sentiment among South African consumers.”

The latest survey was conducted from September 13 to November 11, 2010 and involved 10?502 consumers from 24 markets.?

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