South African consumer confidence slumped to a 10-year low in the third quarter as strikes hit the manufacturing and mining industries and gasoline costs soared to a record.
The FNB/RMB index dropped 9 points to minus 8 as sentiment across all income groups fell, Johannesburg-based First National Bank and the Bureau for Economic Research said in an e-mailed statement today. The index climbed 8 points in the second quarter as inflation stabilized and fears of power outages failed to materialize.
“The consumer confidence index is presently at an even more depressed level compared to the low of minus 4 registered during the height of the 2008 global financial crisis,” FNB said. The latest index number implies that confidence is “not supportive of strong growth in consumer spending.”
Thousands of workers in the construction and car-manufacturing industries downed tools in wage disputes in August, followed by strikes by gas-pump attendants and workers at auto-component dealers in September. Stoppages this year at gold and platinum mines in Africa’s biggest economy have already shaved 0.3 percentage point off economic growth, President Jacob Zuma said in June.
“Work stoppages do not only hamper production in the short run, they also have the potential to dent fixed investment and job creation prospects in the long run,” Sizwe Nxedlana, chief economist at FNB, said. “Consumers are therefore understandably concerned about the outlook for the South African economy.”
A slowdown in consumer spending, which makes up about two-thirds of expenditure in the economy, may undermine prospects for economic growth and job creation. The economy is forecast by the central bank to expand 2 percent this year, the slowest pace since a 2009 recession. The unemployment rate rose to 25.6 percent in the second quarter.
“High unemployment levels, soaring fuel prices and lost income during times of industrial action are impairing the financial positions of low- and middle-income consumers in particular,” Nxedlana said.
The gasoline price rose to a record 13.55 rand a liter ($5.22 a gallon) in August as the rand slumped to a four-year low against the dollar. That’s adding to pressure on inflation, which exceeded the Reserve Bank’s 3 percent to 6 percent target band for a second month in August. Policy makers kept the benchmark interest rate unchanged at 5 percent on Sept. 19, citing global uncertainties and downside risks to economic growth. The currency lost 0.65 percent against the dollar and traded at 9.9377 as of 5:04 p.m. in Johannesburg.
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.