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Consumer sentiment rebounds in third quarter but remains depressed

| Economic factors

Consumer confidence improved in the third quarter but remained in negative territory, indicating the toll several factors are taking on households and their ability to spend.

Interest rates and electricity tariffs increased in the third quarter, job losses continue, and although petrol prices dropped over the period, the benefits were offset by rising inflation.

The First National Bank/Bureau for Economic Research (FNB/BER) consumer confidence index recovered strongly to -5 in the third quarter after falling to an almost 15-year low of -15 in the second quarter.

The rebound in consumer sentiment could probably be ascribed to, among other things, the roughly R1.20/litre drop in petrol and paraffin prices since July and the recent respite in load shedding, FNB chief economist Sizwe Nxedlana said.

However, he warned that: "At -5 index points, consumer confidence remains depressed, pointing to a low willingness to spend and utilise credit among households."

The BER surveys 2,500 adults on how they expect the economy to perform, what they expect their financial positions to be, and how they rate the present time as being appropriate to buy durable goods such as furniture.

The latest consumer confidence index number remains well below the long-term average reading of 5. The index is currently roughly on par with the lowest reading recorded during the 2009 recession when it was at -6.

Those surveyed expected their financial positions to improve, with the subindex rebounding by 13 index points to 11, more than reversing the nine-point drop of the previous quarter.

Although both the economic outlook and time to buy durable goods subindices also improved, they remained deeply in negative territory.

The economic outlook subindex at -15 and the time to buy durable goods subindex at -9 showed most consumers believed that SA’s economic prospects would deteriorate further over the next year and that this was not a good time to buy durable goods, Mr Nxedlana said.

Rising petrol prices, acceleration in food inflation, higher personal income taxes, poor job creation and credit growth, and more interest-rate hikes, would weigh on consumers’ ability to spend in coming months.

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