South African Consumer Mood Drops to 35-Year Low During Lockdown

South African consumer confidence fell to a 35-year low in the second quarter, when restrictions aimed at curbing the spread of the coronavirus pandemic kept all but essential workers at home and weighed on output.

A quarterly index measuring sentiment fell to -33 from -9 in the three months through March, FirstRand Ltd.’s First National Bank said in an emailed statement Tuesday. That’s the weakest reading since a record low of -36 in 1985, the year the United Nations Security Council urged its members to introduce more far-reaching economic sanctions against South Africa over its apartheid policies and the government declared a partial state of emergency.

The median estimate of five economists in a Bloomberg survey was for the index that’s compiled by the Bureau for Economic Research to drop to -22.

South Africa imposed a strict nationwide lockdown on March 27. Enforced by the police and military, people were only allowed to leave their homes to buy food, collect welfare grants and seek medical care -- unless they provided essential services. A gradual, phased re-opening of the economy started on May 1.

“Millions of workers were placed on unpaid leave or reduced pay, or even retrenched, as businesses scrambled to survive the lockdown,” said Mamello Matikinca-Ngwenya, FNB’s chief economist. “This severely constrained household income, and therefore consumers’ ability to spend.”

Deteriorating Finances

The economic outlook sub-index slumped to -21 from -16 and the household financial outlook sub-index fell to -13 from +14. That means most households across all income groups expect their finances to deteriorate over the next 12 months.

Confidence among low-income consumers declining by 37 index points to -35 during the second quarter. That’s even as the government committed to additional spending of as much as 50 billion rand ($2.92 billion) on social assistance for poor households between May and October 2020. The index results “suggest that the considerable efforts by the government to support vulnerable households have not so far fully compensated for the adverse coronavirus-related impacts on their household income,” FNB said.

A sub-index measuring the appropriate time to buy durable goods plunged to a record low -64, signaling an “extreme wariness” by consumers to purchase vehicles, furniture and household appliances. While sales of necessities including food, pharmaceuticals and toiletries are likely to be cushioned in the near term, the decline in confidence and income and rapid increase in infections suggests the “retail sector is still a long way away from firing on all cylinders,” Matikinca-Ngwenya said

©2020 Bloomberg L.P.

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