Low-income earners were helping push up consumption in the third quarter of 2022, with retailers such as Shoprite, which mainly target this income group, still able to turn a profit despite a generally depressed consumer confidence environment.
The rebound in confidence among low-income earners has been attributed to the expansion of the R350 social relief of distress grant announced in August, as well as muted growth in employment levels.
The latest FNB/BER Consumer Confidence Index shows that confidence clawed back some lost ground after plunging to 25-year lows in the preceding quarter.
While consumers were faced with high food prices and increased fuel prices in the past few months, there were nevertheless some green shoots as consumer confidence rebounded somewhat from -25 to -20 points in the three months to August.
FNB chief economist Mamello Matikinca-Ngwenya said consumer confidence among poorer households recorded its highest reading since the first quarter of 2021.
While all three subindices of the consumer confidence index showed a level of recovery, consumer sentiment is still depressed. Matikinca-Ngwenya said this signalled a substantial deceleration in real consumer spending growth relative to the robust rates recorded at the start of the year.
She said a more detailed breakdown of the index showed that confidence levels of middle- and high-income households were under pressure.
“The 75-basis point hike in the prime interest rate in July weighed on confidence levels of indebted middle- and high-income consumers. Even though consumer confidence recovered slightly in the third quarter, confidence generally remains low among consumers, which is not conducive to growth and real consumer spending. The fact that confidence among high- and middle-income earners remains extraordinarily depressed is especially alarming as these affluent groups have more spending power than low-income households.”
Investec chief economist Annabel Bishop said the survey results were indicative of expected GDP recovery in the third quarter.
“While GDP contracted in the second quarter [by 0.7% quarter-on-quarter following] the KwaZulu-Natal floods, slowing global growth and falling real disposable incomes, the third quarter was likely to see a modest rebound of about 0.5% quarter-on-quarter, which will see South Africa’s GDP remain on track to expand by 1.9% year-on-year in 2022,” said Bishop.