The FNB/BER consumer confidence index (CCI) has been losing ground since reaching a peak of +15 index points during the 2010 Soccer World Cup. In the third quarter of 2013, the index reached a decade low of -8 points and improved slightly to a mere -7 points in the fourth quarter.
South African consumers' outlook for the economy fell to its lowest in 20 years due to a number of political and economic constraints the country faced over the past several months, most notably the labour strike action that extended across several key sectors.
“While labour relations have been strained in the mining sector for the better part of the past year, the third quarter of 2013 saw labour turmoil extend to the vehicle manufacturing, construction and airline industries,” said Sizwe Nxedlana, chief economist of First National Bank in a statement.
“Work stoppages do not only hamper production in the short run, they also have the potential to dent fixed investment and job creation prospects in the long run - consumers are therefore understandably concerned about the outlook for the South African economy. "
Cees Bruggemans, consulting economist for FNB added that the slowdown in consumer confidence has been influenced by a number of international and domestic events and is not based on the economy being under pressure.
“It is not that the economy is overheated in any way. The slowdown we’ve been seeing ever since 2010, a part of it is a reflection of what is happening internationally but then domestically of course we have output losses, we have output constraints in terms of supply side, capacity constraints like electricity and there has been a lot of policy meddling in various sectors that has not contributed to business confidence,” he explained.
“Under these circumstances, income and spending growth generally in the economy have slowed.”
According to reports, subdued household consumption expenditure during the festive season has also been predicted. This is based on the slowdown of retail sales, the biggest driver of growth in the country, which grew at a mere 0.2 per cent year-on-year in September.