South African consumer confidence slumped to a nine-year low in the first quarter as slower economic growth, job losses and higher inflation curbed households’ finances.
The FNB/BER index fell 4 points to minus 7, Johannesburg-based First National Bank and the Bureau for Economic Research said in an e-mailed statement today. The index has slumped from a peak of 13 in the third quarter of 2010.
“Not even at the height of the global financial crisis in 2008 were consumers as downbeat about the country’s economic prospects and their household finances as they are now,” FNB said in the statement. “The growth in consumer spending is expected to be subdued and much less supportive of economic growth in 2013.”
Labor unrest and a slowdown in Europe cut exports and undermined economic growth, investment and job creation in South Africa last year. That’s also putting pressure on consumer spending, which makes up two-thirds of expenditure in the economy.
Finance Minister Pravin Gordhan has forecast expansion of 2.7 percent for this year, less than half the 7 percent annual growth the government estimates it needs to cut the jobless rate to 14 percent by 2020. South Africa’s unemployment rate of 24.9 percent is the highest of more than 30 emerging-market nations tracked by Bloomberg.
FNB’s sub-index measuring consumers’ view of the economy’s outlook fell 4 points to minus 11 in the quarter.
The central bank on March 22 kept its benchmark interest rate unchanged at 5 percent, the lowest in more than 30 years, to help support spending even as a weaker rand threatened to push inflation above the target of 3 percent to 6 percent. The currency has declined 5.3 percent against the dollar this year.
“A weaker exchange rate and substantially higher transport and food costs” will add to cost pressures, FNB’s chief economist Sizwe Nxedlana said in the statement. That will place “further strain on the financial positions of households,” he said.