SA festive season client confidence lowest in 20 years

South Africa’s festive client confidence is the bottom in 20 years, exhibiting how low the nation’s customers are on festive cheer, with the Shopper Confidence Index (CCI) reducing additional to achieve -17 within the fourth quarter of the 12 months.

The FNB/BER CCI recovered from -25 index factors in the course of the second quarter to -16 within the third quarter however slipped to -17 factors within the fourth quarter.

The deterioration within the CCI is attributed to a quarterly decline within the financial outlook subindex, whereas the family monetary outlook measure and the index measuring the appropriateness of the current time to purchase sturdy items improved modestly within the fourth quarter, though households remained averse to spending on big-ticket discretionary items.

The CCI for the fourth quarter is even under the studying of -12 recorded in the course of the fourth quarter in 2020 throughout Covid-19, suggesting that customers will hold tight management over their purse strings in the course of the vacation purchasing season, which ought to fear retailers of pricey luxurious items specifically.

A breakdown of the CCI per family earnings group exhibits high-income households incomes greater than R20 000 per 30 days and middle-income households incomes between R5 000 and R20 000 per 30 days have been extra disheartened within the fourth quarter, with the CCI down two index factors for each teams.

Nevertheless, low-income households incomes lower than R5 000 per 30 days have been considerably much less pessimistic about their monetary prospects and South Africa’s financial outlook. That is partly attributable to the truth that lower-income teams are much less delicate to rate of interest developments in comparison with prosperous households.

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Why is client confidence greater amongst low-income teams?

“Sustained sturdy job progress heading into the festive season, particularly within the tourism sector, might have countered the antagonistic affect of cost-of-living pressures on low-income households on the whole. The announcement that the Social Aid of Misery (SRD) grant shall be prolonged via March 2025 most likely additionally buoyed the arrogance of the 8.6 million SRD grant recipients,” Mamello Matikinca-Ngwenya, chief economist at FNB, says.

Nevertheless, excessive rates of interest and a marked deterioration in South Africa’s fiscal place are probably worrying excessive and middle-income customers. In its November MTBPS, Nationwide Treasury stated it will introduce further measures to extend tax income and lower actual authorities spending in 2024, which is able to adversely have an effect on the disposable earnings of high- and middle-income customers specifically, she says.

“Additionally it is instructive to notice how way more pessimistic households are in regards to the outlook for the nationwide economic system in comparison with their very own family’s perceived monetary prospects. Though the overwhelming majority of households (particularly rich customers) are pessimistic in regards to the outlook for the economic system, a small majority of households (particularly much less prosperous customers) anticipate their family funds to enhance over the following 12 months.”

She factors out that the typical studying for the financial outlook sub-index of the CCI, which began in 1994, is 11 factors decrease than the typical studying for the family monetary prospects index (+11).

“Nevertheless, the studying for the financial outlook index is a large 31 index factors decrease than the family funds index. The hole between these two sub-indices widened once more within the fourth quarter and is particularly giant for high-income households at 38 index factors.”

Matikinca-Ngwenya notes that this implies, to an extent, that customers acknowledge the antagonistic implications that components like excessive ranges of load shedding, Transnet’s logistical constraints and a tightening in fiscal coverage maintain for financial progress in South Africa.

“Nevertheless – rightly or wrongly – they don’t anticipate flagging financial progress to result in an equal deterioration in their very own monetary positions.”

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What does the low festive season client confidence imply?

The low festive season client confidence studying alerts that customers will not be in a jolly, high-spending temper. Gross sales of big-ticket discretionary items and particularly interest-rate delicate items, will probably underperform relative to earlier vacation purchasing durations.

Nevertheless, the truth that the low CCI studying largely stems from customers’ very unfavorable perceptions in regards to the outlook for the nationwide economic system and to a lesser extent from strain on their family funds, gives some hope that the all-important Christmas gift-giving interval won’t be an entire whitewash for retailers.

“Necessities, value-for-money merchandise and inexpensive luxuries will probably be on the high of customers’ vacation purchasing lists,” Matikinca-Ngwenya says.

Jee-A van der Linde, senior economist at Oxford Economics Africa, says the buyer confidence knowledge for the fourth quarter exhibits that companies and customers are battling a difficult financial surroundings.

“By all appearances, households appear to have extra confidence in their very own monetary conditions than the outlook they’ve for the floundering South African economic system. Whereas the federal government scrambles to handle supply-side points, circumstances will not be anticipated to enhance meaningfully over the approaching months as inflation will stay excessive and financial coverage tight. Uncertainty about subsequent 12 months’s elections will probably weigh on each customers and traders’ minds.”