The newest SA Consumer Confidence Index (CCI) indicates that our perspective of the current economic environment has plummeted to a 14-year low. We are all feeling the effects of slow economic growth, as the price of consumables, services and utilities continues to rise. CCI plunged from 0 to -4 from the last quarter of 2014 to the first of 2015, setting a gloomy trend for the new year.
At -15, the FNB/BER index is far lower than it was during the recession of 2008/9, recorded at -6. Our low confidence is further proven by the fact that we as consumers have cut down on our spending, even on the basic necessities. Additionally, state implemented pay rises and a wave of job cuts have bred doubt over job security.
As households struggle simply to maintain a normal standard of living, under the crushing weight of debt and the high cost of living, consumers are becoming acutely aware of the gravity of our situation.
Consumers have shown reluctance, with regard to the purchase of durable goods, such as property, cars and furniture, even among high earners. Similarly, a year-on-year (y/y) drop in anticipated retail sales growth to 2.4% has intensified anxieties over crawling economic growth. This has placed the SA Reserve Bank (SARB) in a predicament, as to whether interest rates should be raised or not.
Economists are dramatically divided in their predictions over an interest rate hike, as it would be the first in a year. Some assert that drooping retail sales have lessened the likelihood of a hike, while others are convinced SARB has resigned itself to hiking rates in 2015, as inflation evidently requires curbing.
Clearly, we’ll all just have to wait and see – or rather spend this time building up our savings, in the spirit of National Savings Month!