The First National Bank (FNB)/ the Bureau for Economic Research (BER) consumer confidence index (CCI) improved by 11 index points to a level of -12 in the fourth quarter of 2020, said First National Bank on Monday.
The FNB pointed out that the -12 consumer confidence index is the lowest festive season CCI reading since 2015 and remains well below the average CCI reading of +2 since 1994. The FNB said the COVID-19 and the subsequent economic restrictions contributed to the decline in consumer confidence.
“The further easing of restrictions and a concomitant uptick in economic activity greatly benefits low-income households in South Africa, as most low-income consumers were unable to earn a living by working from home. Millions of low-income households would also have been relieved to hear that the expiration date for the COVID-19 related social grant top-ups were extended from October until the end of December 2020, while the unemployed will continue to benefit from the Social Relief of Distress (SRD) grant until January 2021,” said FNB chief economist Mamello Matikinca-Ngwenya.
She stated that the SRD paid by the government is helping poor households.
“The slight reduction in petrol and paraffin prizes boosted consumer confidence. The festive period spending would be dampened by the COVID-19 this year,” Matikinca-Ngwenya said.
“The rebound in consumer confidence is good news for the broader South African economy, as household consumption accounts for roughly two-thirds of South Africa’s gross domestic product. However, the fact that the confidence levels of affluent consumers, the group with the largest spending power, are still so depressed points to a more muted recovery in overall consumer spending during the fourth quarter compared to the noticeable jump witnessed in the CCI,” she said.
She stated that there would be a substantial decline in durable goods sales this year due to COVID-19 since people do not have enough disposable income.