CONSUMER confidence plummeted in the second quarter of this year to levels last seen in the second and fourth quarters of 2008, a survey showed on Wednesday.
The FNB-Bureau of Economic Research consumer confidence index declined a hefty eight points during the second quarter, to minus three from five in the first quarter.
The decline in consumer confidence implies that consumers' willingness to spend has now waned considerably. This does not bode well for economic growth, given that household consumption expenditure is a key driver of domestic activity.
Cees Bruggemans, chief economist of FNB, said in all, the figure suggested growth in household consumption expenditure, which has been the mainstay of domestic economic growth over the past two years, will be much slower during 2012.
"A confluence of adverse economic and political developments have been gradually weighing down South Africa's economic prospects, and it appears as though consumers have now also capitulated by making a significant downward revision to their expectations," Mr Bruggemans said.
FNB said that while the fall in consumer confidence was substantial, the index had been edging lower since reaching a peak of 15 index points in the third quarter of 2010, around the time of the 2010 Soccer World Cup tournament hosted by South Africa.
During the quarter, consumers' rating of the prospects for the national economy, the outlook for their own finances and the appropriateness of the present time to buy durable goods all deteriorated notably.
The economic outlook subindex of the consumer confidence index dropped from four to minus five index points, indicating most consumers now expect the economic situation in South Africa to worsen over the next 12 months.
"Not even at the height of the global financial crisis in 2008 were consumers as downbeat about the country's economic prospects as now," Mr Bruggemans said.
The percentage of consumers expecting their financial position to improve over the next 12 months slumped from 16 index points to eight in the second quarter. After peaking at 25 in the third quarter of 2010, the financial position subindex of the consumer confidence index declined gradually throughout last year and has reached a four-year low.
"The deterioration in the outlook for the financial positions of households can be ascribed to a slowdown in employment growth and moderating wage inflation, coupled with the increase in the household tax burden and significantly lower growth in social grants expenditure announced in the February 2012 budget," Mr Bruggemans said.
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