More caution than festive cheer

2012-12-05 00:00

WHILE the festive season may be the time to be jolly, consumers are approaching the new year with a great deal of caution when it comes to their spending plans.

This is clear from the latest FNB/BER (Bureau for Economic Research) Consumer Confidence Index (CCI) for the final quarter of 2012, which deteriorated to -3 points from -1 in the previous quarter.

CCI worryingly low

Critically, the index is now at a level last seen in mid 2008, prior to the economic recession.

FNB consulting economist Dr Cees Bruggemans told The Witness yesterday that while the level of festive season spending would be unprecedented this festive season, the rate of growth was set to slow.

Although their rating of “own finances” was largely unchanged, consumers’ rating of the outlook for the economy and the appropriateness of buying durable goods deteriorated.

Lack of stimulus

Bruggemans said there was no evidence that the subdued outlook for 2013 would change, adding that the economy lacked impetus on fixed investment spending.

He added that consumers across the world — including the U.S., China and South Africa — were trimming their spending plans in the wake of economic uncertainties.

“Whenever people are more uncertain, they tend to slow down their spending. South Africa’s private sector is facing uncertainty … and the household sector is also facing this.

“This translates into cautious spending, especially on durable goods.

“I expect that there will be some disappointment on durable goods spending this festive season.”

Festive season still strong

On the whole, however, the festive season is expected to deliver solid sales, particularly given the fact that economic growth has disappointed in the third quarter of the year on the back of widespread strikes.

“It is not as if growth has ceased. The level of spending will be higher than ever this festive season.

“The growth, however, is slowing. I do not foresee any major surprises this festive season.”

Bruggemans added that although consumers had experienced lower growth in disposable income, their overall financial position would remain largely unchanged in 2013.

In fact, the confidence level of consumers in their own finances showed growth from +11 in the third quarter of 2012 to +12 in the fourth quarter of 2012.

“I expect that those who expressed confidence in their own finances have reason to do so.

“Those people who did not also have reason to do so … as they are experiencing real hardships.

“I do not expect major changes here … as the economy is not expected to deteriorate further, to that extent, in 2013.”

— Business Editor.

• All three sub-indices of the CCI remain well below the levels that prevailed during 2010 and 2011, when solid growth in consumer spending led the domestic economic recovery.

• The economic outlook sub-index of the CCI slumped from -4 to -7 in the fourth quarter of 2012.

“Given the adverse implications of the violent strikes in the mining, transport and now also agricultural sectors for fixed investment and job creation in South Africa, it is not surprising that consumers are becoming increasingly concerned about the outlook for the domestic economy,” said Bruggemans.

• The time to buy durable goods index fell by four index points to a three-year-low of -12 in the fourth quarter of 2012.


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