Consumer confidence recovered slightly in Q3 2021 despite violent protests and rampant looting that tore through KwaZulu-Natal and Gauteng, the latest Consumer Confidence Index (CCI) from the Bureau for Economic Research (BER) shows.
However, a breakdown of the CCI per household income shows significantly different results, with South Africa’s wealthy and lower-income earners more hopeful than the country’s middle-class.
The confidence levels of high-income households earning more than R20,000 per month increased significantly from -18 to -11 during the third quarter.
Low-income confidence, consumers earning less than R2,500 per month, also rebounded strongly from -22 to -12.
However, the confidence levels of middle-income households, earning between R2,500 and R20,000 per month, slipped further from -9 to -10 index points.
FNB economist Siphamandla Mkhwanazi said that the increase in low-income confidence could be partly attributed to the reinstatement of the R350 per month Social Relief of Distress (SRD) grant between August 2021 and March 2022.
“Given soaring food and fuel prices and the fact that South Africa’s unemployment rate climbed to a record high during the second quarter, the expiration of these grants at the end of April left gaping holes in the budgets of low-income households,” he said.
Similar to the CCI results for the low-income group, the upturn in consumer sentiment among high-income consumers was also largely driven by an improvement in their household financial prospects.
“The public sector wage agreement that was reached at the end of July in all likelihood bolstered the confidence levels of the more than a million civil servants in South Africa, most of whom fall in the high-income category.
“Although government employees will only receive a 1.5% increase in their salaries this year, the wage deal does include a non-pensionable cash allowance for civil servants ranging between R1,220 and R1,695 per month until March 2022.
“Since the cash allowances will be backdated to 1 April 2021, government employees will receive a significant boost to their September remuneration.”
The recent uptick in dividend payments likely also boosted the confidence levels of affluent consumers and contributed to their increased willingness to purchase durable goods during the third quarter, he said.
Middle-income earners feel the pain
In contrast to the high- and low-income groups, middle-income consumers turned less optimistic about the outlook for their household finances during the third quarter.
This accounted for the small decline in the overall sentiment among middle-income consumers.
Middle-income earners would typically not qualify for the reinstated SRD grant, but some will be government employees that would benefit from the recently negotiated cash allowances.
“The alarming decline in formal sector employment during the second quarter – a drop of 375,000, or 3.5% quarter-on-quarter – in all likelihood hit middle-income households the hardest,” he said.
“The violent looting and arson that ravaged shopping malls, warehouses, factories and small businesses in KwaZulu-Natal and Gauteng during July would only have exacerbated the employment prospects for middle-income earners in particular during the third quarter.”
Furthermore, middle-income consumers are also less likely to work from home than high-income earners, implying that soaring petrol prices – up by nearly R3.50 per litre since January – would also have a disproportionally negative impact on this group.