After expecting a year without restrictions, consumers were left disappointed when geopolitical issues led to global economic conditions that also affected local prices for everything from fuel to food, forcing them to lose confidence in the economy and going into more debt. Consumer Confidence Consumer confidence started 2022 at lows due to the war in Ukraine, as well as the associated humanitarian crisis and its economic ramifications, declining 4 points in the first quarter from -9 to -13, the same depressing level recorded in the second quarter of 2021, according to the consumer confidence index (CCI) FNB / BER ….
After expecting a year without restrictions, consumers were left disappointed when geopolitical issues led to global economic conditions that also affected local prices for everything from fuel to food, forcing them to lose confidence in the economy and going into more debt.
Consumer confidence
Consumer confidence started 2022 at lows due to the war in Ukraine, as well as the associated humanitarian crisis and its economic ramifications, decreased by 4 index points in the first quarter from -9 to -13, the same level depressing recorded in the second quarter. . of 2021, according to the Consumer Confidence Index (CCI) FNB/BER.
In the second quarter, consumer confidence fell to -25, the lowest in three decades after -33 in the second quarter of 2020, when the sudden outbreak of the pandemic and the implementation of the level 5 lockdown reduced the feeling
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Consumer confidence rose only 5 points to -20 in the third quarter, but remained extremely depressed, indicating a substantial slowdown in growth in real consumer spending compared to the robust rates recorded earlier in the year. ‘year.
The fourth quarter saw a surprisingly strong rebound to -8 points in the index for the fourth quarter, bringing consumer confidence roughly in line with the same quarter in 2021. Although a reading of -8 still means depressed consumer sentiment, the extent of the rebound is surprising given the sustained high inflation, frequent load shedding, successive large interest rate hikes and the worsening global economic context.
Consumer debt
There is little to suggest it will be a ‘happy new year’ on the financial front, not just because of the typical January stress of worry brought on by the holiday rush, but because South African consumers continue to facing a perfect storm of economic conditions. Neil Roets, chief executive of Debt Rescue, says this threatens to overwhelm thousands of consumers already in debt.
“Consumers are heading into the new year in a much worse position than they were a year ago and it’s not going to get any easier anytime soon. Interest rates, fuel prices, electricity prices seemingly getting higher for a service that we only enjoy about half the time are growing at a much faster rate than the average wage.”
It notes that while inflation softened in November, transport inflation soared 15.3%, while food and non-alcoholic beverages rose 12.5%. This is illustrated by the fact that the average price of a 2.5 kg bag of maize flour was Rs 34.08 in November. A year ago, it was R15.68, meaning the price of this commodity doubled.
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Consumers looked forward to 2022 when the last of the Covid-19 restrictions were lifted, but it was soon followed by Russia invading Ukraine, sending oil prices through the roof. With global supply chains under pressure, South Africa was hit by the Transnet strike, while load shedding was worse than ever.
However, South African consumers are paying off their debts despite the economic pressures, although they also opened more credit accounts to get there, while lenders kept a closer watch by offering lower loan amounts and putting limits on revolving credit to mitigate default risk, the TransUnion Q3 2022 South Africa Industry Insights report found.
Consumers took out credit cards, non-bank personal loans, home loans and clothing accounts, with credit originations up 14.5% year-on-year and new credit applications up 13.1% in the second trimester.
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Consumers are asking for more loans to find breathing space
Most income groups need around two-thirds of their paychecks to pay off their debts, and without a significant rise in real incomes, the combination of rising interest rates and inflation is stifling consumers borrowing more in an attempt to find breathing space. according to DebtBusters’ 2022 Debt Index for the third quarter.
Consumers are asking more about debt advice (30%) compared to the same period a year ago and most are from first-time buyers of assets such as homes and cars, while interest rates were at record lows before November 2021.
Consumers earning more than R20,000 per month have the highest total debt to annual net income ratio at 150%, the percentage of net income needed to pay off debts. Debt exposure also increased significantly for consumers earning less than Rs 5,000 per month, with a debt-to-income ratio of 87%, also the highest for this group. This group still needs 65% of their income to pay debts each month.
South African consumers are worried about money
According to Deloitte State of the South African Consumer, part of the company’s Global State of the Consumer Tracker, a monthly survey of consumers in 24 countries that has been running since April 2020, 45% of local participants they were more anxious than a week earlier, placing South Africa in third place among the most anxious countries.
Only consumers in Brazil (53%) and Poland (48%) were more anxious, with financial stress still a top driver of anxiety. In the South African survey, four in ten respondents said they are worried about their finances, while a third are anxious about the direction of the economy, with only 38% having money left over at the end of the month after expenses and 57% feel their financial situation has stayed the same or gotten worse over the past year.
The survey also showed that the gap between income and the cost of living is widening, with many consumers using their savings or borrowing to finance their spending and maintain their standard of living. Commodities such as food and housing take up the bulk of their monthly portfolios, putting the discretionary spending side under pressure.
However, local consumers are doing something about their precarious situation by adopting cost-saving behavior to mitigate the pressure of rising prices. Therefore, grocery shoppers were more likely to choose meals based on the majority of foods they have at home (44%) and spend more time planning their shopping (42%), while about a third switch to cheaper protein and buy store brands.
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