FNB/BER: SA consumer confidence hits 5-year peak

Consumer confidence in South Africa has hit a five-year peak, with the FNB/BER Consumer Confidence Index climbing from -10 to -5 index points in the third quarter of this year. This marks the second consecutive 5-point increase and the highest reading since 2019. Mamello Matikinca-Ngwenya, the Chief Economist at FNB, elaborated on the driving factors behind this significant change in an exclusive interview with CNBC Africa. The positive shift in consumer sentiment can be attributed to a combination of factors that unfolded during the survey period. Matikinca-Ngwenya highlighted the impact of the post-election formation of the Government of National Unity (GNU), which bolstered sentiment, particularly among more affluent households. The absence of load shedding, along with notable reductions in petrol prices and inflation, also played a crucial role in boosting consumer confidence. One key aspect that consumers are eagerly anticipating is a potential interest rate reduction in the near future. The expectation of lower interest rates, coupled with the implementation of the two-part retirement system, has instilled greater confidence, especially among households facing financial challenges. While high-income households have benefitted significantly from these positive developments, Matikinca-Ngwenya noted that middle and low-income households have also seen improvements. Deceleration in food inflation and reduced fuel prices have positively impacted lower-income segments, while the prospect of lower interest rates has provided relief to consumers in debt. However, the effectiveness of the two-part retirement system in stimulating the economy may vary among different income groups. Matikinca-Ngwenya explained that individuals in lower-income brackets, particularly those in service or household sectors, may not have access to pension benefits, limiting the system's impact on their financial well-being. Looking at the broader trends over the past few years, the Consumer Confidence Index serves as a critical barometer of consumer sentiment towards the economy. It gauges consumers' willingness to engage in significant purchases and take on credit, reflecting their confidence in economic prospects. The index also provides insights into consumers' financial outlook and their readiness to invest in big-ticket items like vehicles or housing. Despite the index remaining at a negative level of -5, still below the long-term average, the recent improvement signifies a positive trajectory. With consumer confidence returning to pre-pandemic levels, there is optimism that household consumption activity will support GDP growth in the upcoming months. The latest data indicates a promising outlook for South Africa's economy, with consumer sentiment reaching a five-year peak. The convergence of favorable economic conditions and anticipations of further improvements bode well for sustained growth and resilience in the country's consumer landscape.