Consumer confidence takes a dive

30 June 2022 - Consumer confidence has begun to reduce drastically in South Africa this year due to an increase in inflation. According to the FNB and the Bureau For Economic Research’s Consumer Confidence Index, the Russia-Ukraine war, increasing petrol prices, growing inflation and subsequently high interest rates are all factors that play a part in disincentivizing and discouraging consumers in South Africa from making more purchases.

In addition to this, experts such as FNB’s chief economist Mamello Matikinca-Ngwenya contend that the government’s failure to pay R350 per month as per the social relief of distress grant to 10.6 million South African households has also likely played a part in low confidence of consumers. Whilst food, petrol and other basic commodities are a greater concern to lower income households, middle class and upper class households are also concerned about rising interest rates and the consequently higher cost of borrowing. Currently, prices of agricultural commodities have gone up significantly. Cereals, oils and grains have been hit hard in particular due to the war, the disruption of the palm oil market and ban on wheat exports by India respectively. 

Disruption in exports

However, the predictions of food prices in general are quite mixed. This is largely due to the disruption in the country’s exports of fruits and vegetables, which is only adding to the large supplies available, presenting a possibility for a decrease in domestic prices of these. As for meat, foot and mouth disease has broken out amongst cattle. This has caused meat exports to plummet downwards as well, and thus, domestic prices for meat may decrease too. However, poultry prices are expected to rise. 

Therefore, it has been predicted that consumer price inflation will occur in the upcoming months, with the remaining months of the year showing a more moderate range of prices. Take our Cost of Living Survey for South Africa here