Consumer confidence hits record high on change in SA leadership

Johannesburg – The FNB/Bureau of Economic Research (BER) Consumer Confidence Index (CCI) for the first quarter of 2018 rose to a record high of +26 index points, the highest level since a decade ago, a report released on Wednesday showed.

“The latest reading surpassed the previous record high of +23 index points reached in the first quarter of 2007, when the South African economy pumped out real economic growth of nearly 6%,” said a statement.

The index hovered around -8 points for most of 2017.

The FNB/BER report stated that the uptick was based on the positive economic outlook over the next twelve months, including the change in political leadership.

Both the financial and economic outlook indices are now at unprecedented highs, with the economic outlook index rebounding from -2 to +34.

Other positive developments since the end of 2017 which may have influenced the consumers' positive sentiments include the government's free higher education announcement for students from families with incomes less than R350 000 a year, said the report.

"The extraordinary improvement in consumer sentiment during the first quarter of 2018 can largely be ascribed to the change in the country’s leadership, which triggered many positive economic developments,” said Mamello Matikinca, chief economist at FNB.

The CCI provides regular assessments of consumer attitudes and expectations and is used to evaluate economic trends and prospects. The report is based on face-to-face interviews of between 2 000 and 2 500 urban adults.

The report said respondents were also inspired by President Cyril Ramaphosa's "new dawn" speech after he took office, including his pledge to turn the tide of corruption.

The increase in consumer confidence signals a "substantial improvement in consumers' willingness to spend".

The report said there is a risk that the index could drop in the second quarter, as was seen following the surge that came after FIFA's announcement in 2004 that South Africa would host the 2010 Soccer World Cup.

According to Matikinca, the pushing back of "Day Zero" in drought-stricken Cape Town, as well as the Cabinet reshuffle by Ramaphosa had contributed to the first quarter increase.

"While the VAT hike to 15% would have weighed on consumer sentiment, the zero rating of basic food items... will mitigate the impact of this tax increase on low-income households who spend a large proportion of their household budgets on food,” said Matikinca.

A total of 19 basic food items, such as dried beans, samp, maize meal, rice, milk, tinned pilchards, brown bread, eggs and vegetables are exempted from VAT.

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