Consumer close to cracking

Thu, 03 Jul 2008

Consumer confidence plunged during the second quarter of 2008 to a 24-year low, according to the FNB/BER consumer confidence index released on Wednesday.

After declining from +22 to +12 during the first quarter of 2008, CCI dropped by a further 18 index points to -6 during the second quarter of 2008.

According to Cees Bruggemans, chief economist at First National Bank, and Stellenbosch University's Bureau for Economic Research that compiles the index, this constituted "the largest fall between consecutive quarters in 24 years."

At that time – the second quarter of 1984 – the CCI fell by 27 index points.

The latest fall also exceeded the 16 index points registered eight years ago in the second quarter of 2000.

The drop in consumer confidence could be attributed to, amongst other things, an accelerated increase in food prices and transport costs, the April increase in the prime overdraft rate (the fieldwork of the second quarter survey was completed before the announcement of the June increase) and media reports quoting the Reserve Bank and market analysts as saying that further increases were likely.

Other negatives included deteriorating employment prospects, falling house prices, the outbreak of violence against foreigners from the rest of Africa and media reports of a worsening situation in Zimbabwe, according to the index.