Consumer confidence in South Africa plunged to a 35-year low in the second quarter of the year due to COVID-19 – resembling the subdued consumer sentiment recorded at the height of the apartheid regime in 1985.
The FNB/Bureau for Economic Research (BER) Consumer Confidence Index (CCI) declined from -9 in the first quarter of 2020 to -33 during the second quarter.
FNB/BER, said in a statement, the latest CCI reading is now only 3 index points shy of the all-time lowest consumer confidence level (of -36) recorded in 1985 – a year that was racked by violent resistance against apartheid, a partial state of emergency, then president P.W. Botha’s infamous Rubicon speech and South Africa’s subsequent debt crisis.
The economic outlook sub-index of the CCI declined -16 by the first quarter of to -21 in the second quarter, while the household financial outlook sub-index of the CCI saw a complete turnaround in fortunes, plunging from +14 in the first three months of this year to -13 in the second quarter. It was the sub-index measuring the appropriateness of the present time to buy durable goods that registered the worst reading with a massive 38-index-point drop to a historic low of -64.
FNB Chief Economist Mamello Matikinca-Ngwenya said consumers are responding to the dire economic situation by cutting back their spending on durable goods and expensive luxuries such as new vehicles, furniture, household appliances, hardware and jewellery.
“Consumers’ extreme wariness to purchase durable goods, coupled with the substantial increase in financial aid to low-income households, should cushion retail sales of basic necessities, such as food, beverages, other groceries, pharmaceuticals and toiletries in the near-term,” said Matikinca-Ngwenya.
“Nevertheless, given the extent of the blow to consumer income and confidence, as well as the fact that coronavirus infections are now rising faster than ever before in South Africa, the retail sector is still a long way away from firing on all cylinders.”
