WORDS ON WEALTH
The respite offered to consumers by the economic bounce-back from the Covid-19 pandemic appears to have been short-lived. Consumers are now facing a stalling economy, not helped by the worst loadshedding we have had in years, and rising living costs, and they are not happy.
The Consumer Confidence Index (CCI), released quarterly by FNB and the Bureau for Economic Research, has dropped dramatically. Having already slipped from -9 to -13 index points during the first quarter of the year, the CCI plunged to -25 in the second quarter.
The report notes: “Bar the CCI reading of -33 in the second quarter of 2020 – when the sudden outbreak of the Covid pandemic and subsequent implementation of level-five lockdown pummelled sentiment – the current reading is the lowest in more than three decades. Whereas official data shows that the growth in real consumer spending remained robust (3.2% year-on-year) during the first quarter of 2022, the dramatic deterioration in consumer sentiment now signals a marked slowdown in consumer spending in coming months.”
The report says the remarkable collapse of the index in the past three months can be ascribed to a major deterioration in the CCI’s economic outlook sub-index (from -18 to -39) and a complete turnabout in the household financial prospects sub-index (from +8 to -5). The index measuring the appropriateness of the present time to buy durable goods, such as vehicles, furniture, household appliances and electronic goods, also edged down (from -28 to -32), indicating that consumers are not considering spending on such goods anytime soon.
The CCI research was conducted by means of a telephone survey between June 6 and June 20.
A more detailed breakdown of the index shows that, while consumer confidence fell notably across all income groups, high-income confidence has soured more than low-income confidence. “Having already slumped from -11 to -18 index points in the first quarter, the confidence level of high-income households (earning more than R20 000 a month) crashed to -30 in the second quarter. This is only three index points north of the historic low of -33 recorded for this sub-index in the second quarter of 2020, with the vast majority of affluent households now anticipating a deterioration in their household finances and, in particular, in South Africa’s economic growth rate.
FNB chief economist Mamello Matikinca-Ngwenya said: "The economic ramifications of Russia’s war on the Ukraine dealt hammer blows to consumer confidence around the globe and South Africa is no exception. Whereas spiralling food and fuel prices are probably of primary concern to less affluent households, the prospects of further steep interest rate hikes and sinking share prices on the JSE would have compounded the inflationary pressures when it comes to middle- and high-income households.
“The non-payment of the R350-per-month social relief of distress (SRD) grant to 10.6 million South Africans in April and May in all likelihood also weighed on the confidence levels of many low-income households. However, a substantial improvement in job creation in recent months and Sassa’s commitment to resume the SRD grant payments at the end of June – as well as to catch-up all missed payments from July – probably prevented an even more pronounced decline in low-income confidence during the second quarter.”
Food price survey
Meanwhile the Household Affordability Index, which tracks food prices, compiled by the Pietermaritzburg Economic Justice & Dignity Group (PMBEJD), shows that the average cost of the monthly household food basket was R4 688.81 in June, up 13.6% since June last year, when the basket cost R4 128.23.
The index tracks food price data from 44 supermarkets and 30 butcheries in Johannesburg, Durban, Cape Town, Pietermaritzburg and Springbok.
“This situation raises three red flags: increased hunger, increased risk of social instability, and a general deterioration of health – with short-term and long-term consequences,” the PMBEJD says.
The group adds that food price inflation is likely to continue climbing, as winter enters its second month.
Some staple foods that have seen sharp increases in a single month are:
- Cooking oil (13%). A 5-litre bottle of cooking oil costs an average of R228.94 (a month-on-month increase of R27.04).
- Cake flour (7%). A 10kg bag of cake flour costs an average of R115.90 (a month-on-month increase of R7.52).
- Brown bread (5%). A loaf of went up by an average of 60 cents, to R13.83.
- Maize meal (4%). A 10kg bag of maize meal went up by an average of R3.11, to R89.62.
PERSONAL FINANCE