Two months ago, South Africa’s economy experienced an analytical hit when it was announced that consumer confidence plunged to a 10-year low. Now, according to a newly conducted consumer outlook, Africa’s largest economy is headed further down the hill, Business Day Live reported.
Monday, the First National Bank for Economic Research released a consumer confidence index which placed South Africa’s economy is the worst position it’s been in 20 years. The index reached minus eight in the third quarter, moving up slightly to minus seven in the fourth quarter.
Also, in the third quarter, the economic sub-index was minus 14. Now it’s moved down to minus 15, the report noted.
“With inflation quite high and the rand being so weak, there is very little the MPC can do. An interest rate cut could increase inflation so the best option is to remain on hold,” Renaissance Capital economist Thabi Leoka told Business Day Live, referencing plans of the bank’s Monetary Policy Committee.
According to the report, the MPC will hold a meeting this week and announce interest rate initiatives to be implemented next year.
Annabel Bishop, an Investec chief economist told Business Day Live that 2014 interest rate hikes would further jeopardize consumer confidence and slow economic growth. Business Day Live also surveyed 11 economists of which the majority agreed on a fixed five percent repo rate.
“It is a whole list of things that have to turn positive for household income growth and confidence levels to start rising,” Cees Bruggemans, First National Bank’s consulting economist added.
“When it comes to own finances, there is still a majority of consumers who express confidence. Spending by the higher income segment will provide an anchor but all other factors support the view of a very modest retail environment this festive season,” he said.
Consumers who influenced the index were asked about their economic stance as it relates to the economy’s performance as well as their thoughts on the present goods and services purchasing landscape.