SA's consumer confidence levels deteriorated substantially during the third quarter of 2018, according to the latest FNB/BER Consumer Confidence Index released on Wednesday.
It shows that consumer confidence fell from +22 in the second quarter to +7 in the third quarter of the year.
This comes after the latest business confidence index by Rand Merchant Bank and the BER, released on Tuesday, showed that business confidence in SA fell to the lowest level since the Fitch and S&P Global downgraded SA's sovereign credit rating to non-investment grade.
"Although the seeds of an economic recovery were planted with President Cyril Ramaphosa's 'new dawn' and pledge to eradicate the scourge of corruption, further investor-friendly reforms are urgently needed to boost economic growth and household income levels to avoid bitter disappointment," states the CCI report.
The CCI shows that consumer sentiment deteriorated across all income groups, but the report states that the drop in confidence levels of low-income consumers – those earning less than R3 000 per month - was "particularly severe".
Mamello Matikinca, chief economist of FNB, said "a confluence of adverse economic developments in all likelihood deflated the confidence levels of consumers in recent months, including a technical recession in the first half of the year, rising unemployment, an increase in VAT and personal income taxes, a substantial drop in share prices on the JSE, a depreciation in the rand exchange rate and soaring fuel prices".
Confidence levels as measured by the CCI went from -8 index points to a record high of +26 during the first quarter of 2018, and then dipped marginally by 4 index points in the second quarter.
Despite these declines, the latest reading of +7 remains far higher than the very low readings recorded during the last three years of former president Jacob Zuma’s term, according to the report.
The third quarter reading of +7 is also significantly above the long-run average reading of the CCI of +2 since 1994, suggesting that consumers are still optimistic that the outlook for the SA economy and their own household finances will improve during the next 12 months.
"'Ramaphoria' has faded and it has become increasingly clear that domestic economic growth and job creation are still stuck in low gear. Furthermore, while the government's plan to change the constitution to explicitly allow for the expropriation of land without compensation probably heartens less affluent consumers, it is creating apprehension among property owners and the investment community," states the report.
"Add in negative developments in terms of the rand exchange rate, fuel prices and share prices and one can appreciate why consumers are less optimistic about South Africa's economic prospects and the outlook for their household finances compared to earlier in the year."
For Investec chief economist Annabel Bishop, it is key to note that the majority of households still expect their household finances and the performance of the economy to improve over the next twelve months - with the exception of low income earners and the Western Cape.
"The readings are less exuberant than in the first half of the year, but still show above average consumer confidence, while economic growth is in contrast particularly weak," she said after the report was released.
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