SA Consumer Confidence Q4 2010

The FNB/BER consumer confidence index, which was released yesterday, edged fractionally lower in Q4 2010 to 14 versus 15 in Q3 2010, 14 in Q2 2010 and 15 in Q1 2010. Although confidence levels have remained essentially unchanged this year, the overall level of confidence is well above the long-term (25 years) average of 2 index points, suggesting that consumer confidence is solid but also a little unexciting given that confidence had peaked at +23 in the first quarter of 2007.

The modest decrease in confidence during Q4 2010 is a little surprising given the fact that domestic interest rates were cut as recently as September 2010, to their lowest level in 30 years. According to the BER, consumers remain concerned about employment conditions, especially low income earners. This is now a very noticeable and widening gap in confidence between high and low income earners that has developed over the last 6 months. High income earners have generally been less impacted by more recent job cuts as well as strike activity, and have also benefited more (through home ownership) from lower interest rates.

Importantly, there is a reasonably close (but lagged) relationship between consumer spending and consumer confidence. The current level of confidence points to a stable retail environment during the coming year, following the noticeable improvement in consumer activity during the past 6 to 9 months.

The FNB/BER consumer confidence index is derived from 2 500 personal at-home interviews. The surveys cover all demographics in metropolitan areas, cities, towns and villages throughout South Africa. The consumer confidence index reveals the change in consumers’ expectations. The index has fluctuated between -36 (indicating an extreme lack of confidence) and +23 (indicating extreme confidence).

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