The FNB/BER consumer confidence index, which was released today for Q3 2011, fell sharply to +4, versus +11 in Q2 2011, and +9 at the start of the year. This is the lowest level of consumer confidence recorded since Q2 2009. Furthermore, although the level of confidence remains above 0, it has fallen noticeably during the course of 2011, signaling a growing concern about the state of the economy. The long-term average level of confidence is a little above 0.
According to the BER, fewer consumers now expect the economy to improve when compared with three months ago. Clearly, the worsening macro-economic news flows (especially around the US and Euro-area) have had a negative impact on consumer sentiment in recent months. Additionally, the sluggish domestic labour market, rising household costs and still high domestic consumer debt levels are negatively impacting confidence.
Importantly, there is a reasonably close (but lagged) relationship between consumer spending and consumer confidence. The current level of confidence points to a weakening retail environment during the coming 12 months, following the noticeable improvement in consumer activity during 2010 and early 2011.
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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