JOHANNESBURG - The South African consumer confidence index shrugged off a weak economy, higher taxes and a spike in fuel prices, lifting it to near-record highs in the second quarter.
Data from the First National Bank (FNB) and the Bureau of Economic Research (BER) yesterday showed that consumer sentiment inched up despite retreating business confidence, which fell for the fifth consecutive month in June to 93.7 points from 94 points in May.
FNB/BER said the index eased to 22 index points, following its record high of 26 points reached in the first quarter of 2018.
FNB chief economist Mamello Matikinca said that the sentiment came surprisingly high against a subdued business confidence and weak economy.
“These include petrol price hikes of nearly R2 per litre between March and June, higher personal income taxes from the end of March and an increase in the VAT rate on April 1,” Matikinca said.
Consumer confidence rose in the first quarter from -8 index points in last year’s fourth quarter.
The index nearly closed in on the previous high of 23 points, reached in the first quarter of 2007, when real economic growth peaked at almost 6 percent.
FNB/BER said the index benefited from an interest rate cut of 0.25 percentage points, hefty wage hikes for civil servants and bus drivers, among others, and better rains in the drought-stricken Western Cape.
But Stanlib economist Kevin Lings warned that the buoyant sentiment had not translated into actual spending as credit demand, house prices, and other indicators showed that consumers remained jittery about the economy.
Come off
“My suspicion is that in the coming quarter the confidence number will come off further,” Lings said.
“I’m not saying it’s going to be below zero, but I do expect it to come off,” he said Yesterday the SA Chamber of Commerce (Sacci) said that its Trade Activity Index had fallen to 30 points in June from 40 points in May, while its Trade Expectations Index had also eased to 49 points from 51 points during the period.
Sacci said that its six-month employment outlook index had also declined, by 2 index points to 43 points during the period.
The FNB/BER said that political leadership change in December, when President Cyril Ramaphosa was elected as ANC leader, had also created great optimism.
SA Institute of Race Relations chief economist Ian Cruickshanks said that consumer confidence was still hurting from the problems of higher income tax and the increase in value-added tax as well as the country’s low business activity, among others.
“Those factors remain the same. However, there is a slightly better outlook, but we are not seeing it in consumer spending just yet,” said Cruickshanks.
Investec economist Lara Hodes said that the lower than expected growth domestic product in the first quarter, the sliding business confidence in the country, surging fuel prices, taxes, combined with a weaker domestic currency have continued to constrain consumer spending.
“The BER warns that should ‘financial positions of households fail to improve in line with consumers’ lofty expectations, frustrations will likely grow and dissatisfaction may set in’,” Hodes said.