SA Consumer Confidence slips in the second quarter

The FNB's Consumer Confidence Index slipped to minus 13 points in the second quarter of 2021, reflecting a decrease from the previous position of minus 9 in the first quarter. The latest data indicates a notable decrease in consumer confidence levels, particularly among low-income households. Mamello Matikinca-Ngwenya, Chief Economist at FNB, discussed the implications of this decline in a recent interview with CNBC Africa. Matikinca-Ngwenya highlighted the surprising downturn in confidence numbers following a slight improvement in the first quarter of the year. The index had moved from negative 12 to negative 9 but regressed to negative 13 points in the second quarter. The chief economist noted that low-income households were the most affected, attributing their decreased confidence to high food and fuel prices, along with the third wave of COVID-19 infections. Furthermore, the lack of significant job creation in lower-skilled sectors and the reduction in government support programs further impacted consumer sentiment. In contrast, high-income earners maintained optimism about their financial outlook and continued to view it as a favorable time to make large purchases. Matikinca-Ngwenya suggested that the accommodative monetary policy implemented in the previous year had enabled high-income consumers to save and potentially drive up spending on non-durable and semi-durable goods. This could lead to a divergence in consumer behavior, creating a two-speed consumer market with varying levels of expenditure. When asked about the outlook for lower-income earners for the remainder of the year, Matikinca-Ngwenya expressed concerns about the structural weaknesses already present in the labor market prior to the pandemic. She emphasized that the labor market's fragility, exacerbated by factors such as skill mismatches and high job-seeking costs, would continue to disproportionately affect low-income households. Persistent COVID-19 flare-ups and ongoing lockdown measures could further exacerbate the challenges faced by this income group, particularly in output-oriented sectors. Overall, the economic data indicates a challenging period for South African consumers, with disparities emerging between income groups. The outlook for the remainder of the year remains uncertain, especially for lower-income earners who are likely to bear the brunt of ongoing economic disruptions and structural issues in the labor market.