Further decline in consumer confidence:survey

2010/01/28

Consumer confidence in South Africa is at its lowest level since 2004, a survey released on Thursday found.

The latest MasterCard Worldwide Index of Consumer Confidence found that, having struggled through the first recession in 17 years, consumer confidence in South Africa has fallen to 59.8 from 67.3 six months ago and 78.7 a year ago.

"This is the lowest score ever recorded since the survey was first conducted in 2004 in South Africa. "It is also below South Africa's historical average of 79.35 over the last two years," the survey said. South African consumers are less confident than they were in both January and July 2009.

Anthony West, general manager, Africa, MasterCard Worldwide said an estimated one million jobs had been lost in the South African labour force over the past year.

"With the South African National Treasury announcing a budget deficit of 7.6 percent of gross domestic product in the 2009/10 fiscal year, consumers and businesses seem to have been hit harder by the global economic turmoil than it was first anticipated," West said. Roelof Botha, independent economic advisor, said the decline in the overall MasterCard Confidence Index score to its lowest level since inception was not surprising when viewed against the background of South Africa's first recession since the transition to democracy.

"Although the country managed to return to positive real GDP [gross domestic product] growth in the third quarter of 2009, it will take at least another quarter for some sectors of economic activity to fully recover." The MasterCard Worldwide Index of Consumer Confidence is based on a survey which measures consumer confidence on prevailing expectations in the market for the next six months based on five economic indicators: Economy, Employment, Stock market, Regular income and Quality of life. The Index score is calculated with zero as the most pessimistic, 100 as most optimistic and 50 as neutral. The latest survey was conducted from October 1 to November 9 2009. The survey found that while South Africa saw an overall drop in consumer confidence for the market as a whole across all the major indices, the scores remained slightly positive with Quality of Life scoring 56.9, Regular Income scoring 66.8, Economy scoring 59.0 and Employment coming in at 53.7.

Of the five indices that MasterCard measured for consumer confidence, only the Stock Market indicator presented an increase from 53.7 in the second half of 2009 to 62.6 in 2010. According to Botha, the increase in the Stock Market indicator was closely correlated to trends in the All-share index (Alsi) of the Johannesburg Stock Exchange (JSE).

"The percentage improvement in the indicator over the past six months amounts to 17 percent, compared to increase in the JSE Alsi of 13 percent and 22 percent during the three months and the six months preceding the month of the survey, respectively," Botha said. Johannesburg ousted Durban as South Africa's most confident city with a positive score of 70.6. This score was well above the country's overall confidence score of 59.8 and 4.1 points higher than six months ago. Durban's score plummeted 39.2 points from 89.6 a year ago to a current score of 50.4, not only making it the least confident city in South Africa, but also only fractionally positive. Cape Town experienced a decline of 9.6 points from 66.7 to a slightly optimistic score of 57.1. Botha said a plausible explanation for the divergence between the three cities covered by the survey was the toll that the recent recession has taken on tourism. "Inbound tourism from overseas and Gauteng, contributes significantly to both Durban and Cape Town.

"Due to the decline last year in real personal disposable income of South African households, the first in almost two decades, combined with a general global slump in tourism activity, both Durban and Cape Town experienced declines in air travel passenger arrivals during 2009." He added that the decline was particularly severe for Durban, which recently lost the "Blue Flag" status of several of its beaches.

On a positive note, he said it should be pointed out that Johannesburg possessed a highly diversified economy, with every sub-sector of economic activity contributing to overall economic output.

"The fact that the latest score for Johannesburg is 4.1 points higher than the last survey is a clear indication amongst the city's respondents that the economy has returned to positive economic growth." (Source : Sapa)