South African consumer confidence recovers slightly in first quarter

SOUTH Africa’s consumer confidence index recovered from near 14-year lows in the first quarter but remained in negative territory as the economic growth outlook remained bleak, a survey showed on Tuesday.

The index registered -9 in the first quarter from -14 in the fourth quarter, said the First National Bank (FNB) and the Bureau for Economic Research, who compiled the report.

The index had fallen to -15 in the second quarter of last year, its lowest in 14-1/2 years.

FNB chief economist Sizwe Nxedlana said the slight recovery was helped by the end of power cuts and a fall in fuel prices between October 2015 and March 2016, among other things.

Nxedlana however said the domestic political turmoil, low business confidence levels, a severe drought, soaring food prices and rising interest rates continue to weigh on domestic economic growth prospects.

South Africa’s Reserve Bank has raised benchmark lending rates by a total of 200 basis points in the last two years as it fights accelerating consumer prices triggered by a depreciating currency, drought and above-inflation wage hikes.

“Given that the heydays of easy access to unsecured credit, extraordinarily low interest rates and strong growth in public sector employment and wages are now behind us, we expect the growth in real consumer spending to slow further during 2016,” Nxedlana said.

Data last Thursday showed South Africa’s economy was picking up in the past two months, but analysts said global economic weakness and domestic political tensions could make the reprieve short-lived.

President Jacob Zuma survived an impeachment vote and has faced calls to step down after the constitutional court ruled that he had breached the constitution by ignoring a directive to pay some of the state money spent on renovating his home.

The Treasury has said political upheavals will not divert the government’s attention from implementing growth policies.-Reuters