South African Consumer Confidence Drops Sharply in Q2 2024
The latest FNB/BER Consumer Confidence Index shows a notable decline, falling from –7 in the first quarter to –19 in the second quarter of 2024. This slide reflects growing unease among households as external shocks, particularly the recent escalation in the Iran‑Israel conflict, push fuel prices higher and strain disposable incomes.
What the Index Measures
The FNB/BER survey, conducted jointly by First National Bank and the Bureau for Economic Research, gauges sentiment across four key dimensions: current economic conditions, expected economic conditions, personal finances, and willingness to make major purchases. A negative score indicates that more respondents feel pessimistic than optimistic.
In the Q2 release, the index’s sub‑components all moved downward:
- Current economic conditions: –12 (down from –5)
- Expected economic conditions: –22 (down from –9)
- Personal finances: –15 (down from –8)
- Willingness to spend on durables: –24 (down from –10)
These figures suggest that consumers are not only viewing the present economy more bleakly but are also cutting back on future spending plans.
Drivers Behind the Decline
Analysts point to two primary forces:
- Fuel price shock: The Iran‑Israel tensions triggered a spike in Brent crude, pushing South African petrol prices above R23 per litre in June 2024 – the highest level since early 2022. Higher transport costs directly inflate household expenses, especially for low‑ and middle‑income families.
- Inflationary pressure: Consumer Price Index (CPI) data from Statistics South Africa showed headline inflation at 6.4% in May, up from 5.8% in April, largely driven by transport and food categories. Rising prices erode purchasing power, prompting consumers to delay discretionary purchases.
Insights from FNB Chief Economist Mamello Matikinca‑Ngwenya
In a recent Business Day TV interview, Matikinca‑Ngwenya elaborated on the survey’s implications:
“The confidence drop is a clear signal that households are feeling the pinch from higher fuel costs and broader inflation. When people anticipate continued price pressure, they tend to prioritise essential spending and postpone big‑ticket items such as vehicles or home renovations.”
She highlighted three areas where the impact is most evident:
- Retail spending: Early‑year data from the Retail Trade Survey showed a 0.3% month‑on‑month decline in non‑essential goods sales in April, accelerating to a 1.2% drop in May.
- Credit uptake: Applications for personal loans and credit cards fell by roughly 8% quarter‑over‑quarter, according to the National Credit Regulator’s May report.
- Savings behaviour: Household savings ratios edged up slightly, indicating a precautionary shift as consumers build buffers against uncertain income streams.
Inflation Outlook and Policy Response
Matikinca‑Ngwenya noted that the South African Reserve Bank (SARB) remains vigilant. With the repo rate currently at 8.25%, the central bank has signaled that further tightening could be considered if inflation expectations do not anchor. However, she cautioned that aggressive rate hikes risk exacerbating the confidence slump by increasing borrowing costs for already strained households.
Looking ahead, the economist expects a modest rebound in confidence only if:
- Fuel prices stabilise or decline as geopolitical tensions ease.
- Wage growth catches up with inflation, boosting real disposable income.
- Targeted fiscal measures—such as temporary fuel subsidies or expanded social grants—are implemented to protect vulnerable groups.
Takeaway for Consumers and Businesses
The current environment calls for careful budgeting and a focus on essential expenditures. For businesses, especially those in discretionary sectors, the data suggests a need to adapt marketing strategies, emphasize value propositions, and consider flexible payment options to maintain sales volumes.
As the situation evolves, monitoring the FNB/BER Consumer Confidence Index alongside monthly CPI and fuel price releases will provide early warnings of shifts in household sentiment.
