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Consumers' confidence in South Africa lowest in 20 years

Staff writer |
Consumers' confidence in South Africa has plunged to its lowest level in 20 years, worse than during the height of the financial crisis in 2008, as South Africans say they expect the economy to deteriorate over the next 12 months.

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This emerged from the latest First National Bank/Bureau for Economic Research's consumer confidence index on Monday, which remained in negative territory in the fourth quarter. The overall index changed very little, from minus eight in the third quarter to minus seven in the fourth.

Despite the marginal improvement in the overall index, the record low levels of confidence in the economy's prospects are close to those that prevailed during the recession and severe power outages in 2008.

Weak consumer confidence, together with a string of other economic data such as disappointing manufacturing output, would normally bode well for an interest rate cut, although analysts are unanimous that a rate cut is unlikely as the Reserve Bank wants to keep inflation in check.

The consumer confidence index combined the results of three questions posed to South African adults between October 9 and 28. Consumers were surveyed on their expectations of economic performance‚ their expected financial position and how they rate the present time as being appropriate to buy durable goods such as furniture‚ appliances and electronic equipment.

Consumers are feeling very downbeat about the economy, with the economic outlook subindex declining further to minus 15 from minus 14 in the third quarter. This gloomy sentiment is, however, out of line with several other forecasts, which expect the economy to improve next year.

Despite their depressed outlook, consumers are feeling slightly more optimistic about their finances, which could partly be attributed to recent wage increases, petrol price cuts in the past few months and some jobs created in the third quarter. These factors are likely to have improved household disposable incomes.


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