JOHANNESBURG – The Bureau for Economic Research (BER) on Monday warned that the country’s consumer confidence was likely to remain in negative territory in the immediate term, as buyers were expected to hold back on purchasing luxuries because of the massive drop in incomes and employment.
FNB/BER said sentiment remained subdued in the third quarter, despite recovering somewhat on the further easing of lockdown restrictions in August.
It said the consumer confidence index rose to -23 points after hitting a 35-year low of -33 points in the second quarter.
FNB economist Mamello Matikinca-Ngwenya said the negative reading was the second lowest on record since 1993.
Matikinca-Ngwenya said the recovery could be ascribed to increases in the household finances and the time to-buy durable goods sub-indices of the index.
She said it could take years for consumer confidence and household income to recover fully.
“When household income is under pressure and consumer confidence is low, households tend to slash their spending on expensive luxuries,” she said.
Matikinca-Ngwenya said the vast majority of consumers still considered the present time as highly inappropriate to purchase big-ticket items, such as passenger cars, household furniture and jewellery.
Domestic passenger car sales were still 32.6 percent lower last month, compared with August 2019, despite the sector being fully operational since June.
“We therefore expect retail sales of durable and semi-durable goods – such as new vehicles, high-end furniture and household appliances, jewellery and designer clothing and footwear – to remain under intense pressure in the foreseeable future,” she said.
The index also forecast that the country’s economic prospects would deteriorate over the next 12 months.
The sub-index gauging the economic outlook deteriorated to an almost four-year low, deteriorating further in the third quarter to -23 points from declining to -21 points in the second quarter.
Investec chief economist Annabel Bishop said the forecast of up to three million job losses during the second quarter also weighed on economic activity in the third quarter.
“Unemployment could remain elevated in the third quarter, as well as economic activity levels will be well below those in the first quarter,” Bishop said.
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