Latest consumer confidence index reveals South Africans' fixation with their finances

Despite South African confidence levels remaining unchanged from the first quarter of 2015 at 87 points according to the latest Nielsen's Consumer Confidence Index Report for Q2 of 2015; recessionary sentiment increased by 3 percentage points, with 73% of respondents of the belief that the country is in an economic slump at present. (Consumer Confidence levels of above and below a baseline of 100 indicate degrees of optimism and pessimism, respectively)
Nielsen South Africa MD - Craig Henry
Nielsen South Africa MD - Craig Henry
Overall, South African confidence is more pessimistic than its sub-Saharan African counterparts although Nielsen South African Managing Director Craig Henry points out that consumer confidence does not correlate to ability to spend or affluence, in fact more the inverse.

"South Africans have experienced little change in their personal circumstances to shift their more negative perceptions. Consumer confidence levels have remained stable for close to four consecutive quarters, with the prevailing views cautionary on all confidence measures. Paying off debt has overtaken the economy and job security as the major concern, with consumers increasingly struggling to make ends meet," says Henry.

Concern over finances

Evidence of this is that when asked: "What do you think of your local job prospects over the next 12 months?" 27% of respondents said good, while a large portion of respondents (45%) said not so good, and a further 20% believe they will be poor.

In response to the question; "Considering the cost of things today and your personal finances, would you say this is the right time to buy the things you want or need?", only 27% said it is a good time and the majority (70%) said it's "not so good", or a "bad time" to be buying.

South Africans are also far more focused on their finances than other African countries due to the level of debt they have. This is borne out by the fact that once South Africans have covered their essential living expenses the most common way local consumers utilise their spare cash is paying off debts/credit cards/loans (41%), while 34% say they put it into savings. Twenty four percent of South Africans also stated that they have no spare cash.

South African's anxiety over the bigger financial picture was also clear as the highest number of respondents (17%), indicated that their biggest concern over the next six months was debt and 15% said the economy. The second biggest concern is increasing utility bills such as electricity/gas/heating (14%) followed by Crime (12%).

The overwhelming majority (73%) of South Africans think the country is in a recession at the moment and 69% think we won't be out of the recession in the next 12-months while 25% are not sure.

As a result of these increased financial concerns; compared to this time last year, 81% of respondents said they had changed their spending habits to save on household expenses. Seventy two percent cut back on take-away meals, 64% spend less on new clothes, and 63% are trying to save on gas and electricity.

When economic conditions do improve, more than half said they would continue to save on electricity and take away meals and one third will continue to switch to cheaper grocery brands.

Deeper African insight

In the first quarter of 2014, the global Consumer Confidence Index survey was extended to include coverage of Kenya, Ghana and Nigeria. These countries are surveyed using a mobile methodology which differs from the online methodology used to report consumer confidence and spending intentions for the other 60 countries outlined in the report. The latest results reveal that consumer confidence increased eight index points in Kenya (112) and three points in Nigeria (132) in the second quarter.

Conversely, confidence decreased five points in Ghana (94) the second consecutive quarter of declines and 9 points behind a year ago, as consumers continue to face rising inflation and economic instability. The outlook for jobs increased significantly in Nigeria and Kenya, rising 11 and eight percentage points, respectively, from the first quarter. 85% of Nigerian respondents and 67% of Kenyan respondents believe the state of their personal finances are good/excellent, up two and three percentage points, respectively. Conversely, sentiment for all three indicators declined in Ghana.

Likewise sentiment for personal finances also increased in both countries. 85% of Nigerian respondents and 67% of Kenyan respondents believe the state of their personal finances are good/excellent up two and three percentage points respectively, however only 56% of Nigerians and 40% of Kenyans believe the present is a good time to buy, and the majority of respondents in the three countries (70% Ghana, 64% Kenya and 58% in Nigeria) said they did not have spare cash; levels that increased in Ghana but declined in Kenya and Nigeria from the first quarter. Among those who claimed discretionary funds, saving continued to be a priority for the majority: 82% in Ghana, 83% in Kenya and 79% in Nigeria plan to put money into savings.

Discretionary spending intentions for home improvement projects were the second biggest priority among respondents in all three countries.

The global outlook

Looking at global consumer confidence Nielsen Demand Institute senior vice president president Louise Keely comments; "Contrasts within and across markets continue to be a dominant feature of the global economy. Consumer confidence in Eurozone markets has been relatively stable, with the notable exception of Greece."

Despite the recent Eurozone economic uncertainty, consumer confidence grew throughout the European region in the second quarter, as 21 of 32 markets (65%) were more optimistic than at the start of the year.

Further afield, Latin America has fallen deeper into a recessionary mindset and US confidence has declined but remains at an optimistic level, while confidence has also declined in the UAE, Saudi Arabia and Egypt.

On the up and up

In contrast, India consumer optimism is at its highest level since 2011 which is positive news but discretionary spending levels are yet to see a huge transformation. There are also signs of positive growth in consumer spending on consumer packaged goods as indicated by a slight increase in growth compared to the previous quarters. This represent important steps for increasing domestic consumption.

In China, consumers' desire to spend is growing especially in lower tier cities and in the rural parts of the country. There is also higher income levels and growing e-commerce penetration in these areas," said Yan Xuan president of Nielsen Greater China.

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