South Africa's consumer confidence recovers

South Africa's consumer confidence improved slightly in the second quarter due to fewer hours of load-shedding and a drop in fuel and food prices, but uncertainty around national elections kept some consumers worried, data released yesterday showed.

The consumer confidence index (CCI), sponsored by First National Bank (FNB) and compiled by the Bureau for Economic Research (BER), improved to minus 12 points in the quarter, from minus 15 points in the first quarter.

"Positive developments such as the cessation of load-shedding during the second quarter, substantial cuts in fuel prices in June... [and] a significant deceleration in food inflation likely buoyed confidence levels, particularly among low- and middle-income consumers," FNB chief economist Mamello Matikinca-Ngwenya said.

However, the confidence among high-income households remained largely unchanged in the run-up to the national elections and amid persistently high interest rates.

"High interest rates and uncertainty over which parties would form part of South Africa's government of national unity (GNU) probably kept the lid on high-income confidence," Ngwenya said. "Provided that the GNU remains intact and the JSE and rand exchange rate hold onto their recent gains, there is scope for an improvement in high-income confidence during the third quarter."

The African National Congress (ANC) and its largest rival, the white-led, pro-business Democratic Alliance (DA) have agreed to work together in South Africa's new GNU.

Investors anticipate that the unity government will pick up the pace on existing reform plans for electricity, rail and port sectors needed to revive an economy that has barely grown in the last decade and has an unemployment rate that is among the highest in the world.