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South African consumer confidence surged in the third quarter to pre-pandemic levels, driven by increased optimism about personal finances which bodes well for household spending.
A quarterly index measuring consumer sentiment compiled by FirstRand’s First National Bank and Stellenbosch University’s Bureau for Economic Research climbed to -5 in the three months through September from -10 in the previous quarter. It was the highest reading since the first half of 2019.
“A confluence of positive developments has bolstered the confidence levels of South Africa’s more affluent consumers over the last six months,” FNB Chief Economist Mamello Matikinca-Ngwenya said on Tuesday, citing the formation of a broad governing coalition following May 29 elections, improved electricity supplies, lower inflation and a stronger rand.
Investor sentiment rallied after the African National Congress, which lost its parliamentary majority in the vote for the first time since 1994, opted to ally with centrist rivals including the Democratic Alliance rather than the left-leaning Economic Freedom Fighters and or the uMkhonto weSizwe Party of former President Jacob Zuma.
“The rand seems to be finding sustainability around the levels below R18 to the dollar as the political risk of national coalitions seem to have faded,” South African Deputy Finance Minister David Masondo told reporters at a separate event in Johannesburg.
“I do think that this GNU provides a great opportunity,” he said, referring to the so-called government of national unity.
The survey’s household finances sub-index jumped to 14 from 8 the prior quarter — the highest reading since the last quarter of 2021 — signalling an improvement in consumers’ willingness to spend.
The increase in the index was driven by much-improved confidence among higher-income households who earn more than R20 000 (US$1 133) per month. A change in South African law that allows early withdrawals from pension funds was also seen bolstering household’s financial confidence, FNB/BER said.– Bloomberg
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