South African consumer confidence rebounded from a nine-year low in the second quarter as inflation stabilized and the threat of power outages never materialized.
The FNB/BER index rose 8 points to plus 1, with confidence improving across all income and population groups, Johannesburg-based First National Bank (FSR) and the Bureau for Economic Research said in an e-mailed statement today. The index fell four points to minus 7 in the first quarter as economic growth slowed and job losses mounted.
The improvement in confidence may “in part reflect a correction from an overly negative first-quarter result,” FNB said in the statement. “However, the second-quarter level of consumer confidence is still well below the post-apartheid average of plus 6 index points, signaling a significant moderation, but not a collapse, in household spending.”
Mining strikes and a slowdown in Europe cut exports and undermined economic growth, investment and job creation in South Africa last year. That’s put pressure on consumer spending, which makes up about two-thirds of expenditure in the economy.
Finance Minister Pravin Gordhan expects the economy to expand 2 percent to 2.2 percent this year, well below the 7 percent annual growth the government is targeting to cut the jobless rate to 14 percent by 2020. South Africa’s unemployment rate rose to 25.6 percent last quarter from 25.2 percent in the previous three months, Statistics South Africa said yesterday.
The negative sentiment was partly offset by inflation easing for a second month to 5.5 percent in June, even as the rand slumped 14 percent against the dollar in the first half. While demand for electricity threatens to outstrip supply, state power utility Eskom Holdings SOC Ltd. has to date managed to avoid power outages.
“For the rise in consumer confidence levels to translate into a more permanent improvement in household consumption expenditure, there also needs to be a sustained recovery in real disposable income growth and household credit extension,” FNB said. Rising food and fuel prices and the slow pace of job creation will continue to weigh on spending, it said.
The confidence index is based on a survey of consumers’ views on the expected performance of the economy, future financial position and the appropriate time to buy durable goods.
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