SA consumers worried about interest rate hikes, rand depreciation
The possibility of another interest rate hike by the South African Reserve Bank and rand depreciation has led to a drop in consumer confidence to its second-lowest reading since 1994.
This was revealed by the latest FNB and Bureau of Economic Research (BER) Consumer confidence index, released on Thursday morning.
The consumer confidence surveys provide regular assessments of consumer attitudes and expectations.
FNB chief economist Mamello Matikinca-Ngwenya says the latest reading indicates tremendous concern among consumers about South Africa’s economic prospects and household finances.
"Further interest rate hikes, rand depreciation and concerns about South Africa’s diplomatic relations with the rest of the world in all likelihood compounded the negative impact of the electricity crisis on high-income confidence.
“Affluent consumers are more likely to have invested – at great expense - in alternative electricity sources such as solar or battery power and are also more inclined to have debt that is tied to the soaring prime interest rate (e.g., home loans, as opposed to unsecured debt).
“With the prime interest rate having increased by 475 basis points over the last 2 years, debt servicing costs are starting to bite.
“The weaker rand exchange rate is also putting upward pressure on the cost of overseas travel and imported goods such as new vehicles, typically purchased by affluent consumers," says Matikinca-Ngwenya.
She adds that load shedding and sustained high food inflation are likely of primary concern to low- and middle-income households, "but sharply lower paraffin prices and the extension of the jobs recovery in the services sector may be cushioning the impact on less affluent consumers”
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