The latest Nielsen Consumer Confidence Index (CCI) for Q2, 2017, reveals that the economy, job security concerns and increasing food prices are leading to deferred spending and a longer-term focus on servicing debt and savings rather than spending. Despite this, the most recent CCI does reflect a one-point increase to 78 points, the same level it was in Quarter 2, 2016.
Nielsen South Africa MD Bryan Sun comments: “South Africans are cautious with their spending, in light of increased pressure on managing their personal finances given the fluctuating inflation rates and economic uncertainty. More people are therefore implementing cost-cutting measures to scale back on discretionary expenses and any spare cash they may have, is allocated to savings and investment.”
With continued pressure on consumers’ disposable income, Nielsen’s CCI Quarter 2, 2017, results reflect the persistent anxieties of South African households. Nagging uncertainty and fears for the future seem set to continue reflected in 77% of survey respondents foreseeing poor job prospects for South Africans, over the next 12 months.
In terms of their personal finances, 27% of South Africans claim they have no spare cash available to them, and a sizeable 44% of respondents claim their personal finances range from ‘not so good’ to ‘bad’. But on a more positive note, at least half (53%) of the consumers claim to have a good or excellent state of personal finances, which has improved three percentage points from Quarter 4, 2016.
In terms of whether now is a good time to buy the things they want and need, 76% said it is not a good time, resulting in the majority of consumers having no predisposition towards more impulsive or big-ticket item purchasing.
Heightened economic perceptions come with a personal obligation towards better managing squeezed household budgets. In light of the above, this quarter’s results reflect a strong responsibility for future financial planning, revealed by 38% of South Africans saying they will use their spare cash to put into savings. This is 4% ahead of the Africa Middle East (AME) average of 34%. Paying off debt is also a high priority, with 34% of South Africans, versus the 19% AME average, who say they would use spare cash to be accountable and pay off debt, credit cards and loans, with a further 14% opting to pay medical insurance premiums and 12% putting funds into retirement (over the 6% AME average).
What worries South Africans most?
In terms of the trended CCI data since 2005, which provides a long-term view of changes in consumer outlook, this reveals a growing intensity of macro-level concerns, with 29% of South Africans citing the economy as their top one or two concern, and 83% believing the country is in an economic recession, a 10% increase from Quarter 4, 2016. Only 12% of the population predict South Africa will be out of the perceived recession within six months.
With job prospects now at their second-lowest level in 12 years and growing unemployment, job security has become South African’s second-biggest concern (26%), affecting consumers’ predisposition to unwarranted spending with discretionary purchases the first to go.
Other factors associated with consumers' concerns for their future are closer to their personal circumstances, with personal debt (21%) and higher food prices (21%) featuring amongst their top five concerns.
These latest concerns are reflected in the Quarter 2, 2017, cost-cutting actions, where 83% of consumers reveal they have changed their spending on household expenses with takeaway meals the first to be reduced by 65% of consumers, followed by less spending on new clothes (63%) and 59% choosing cheaper groceries off the retail shelves. Holidays (42%) and out-of-home entertainment at 55% also get the squeeze.
Overall Sun comments: “Based on the outlook, which points to deteriorating perceptions about the economy and future job prospects, consumers are taking on a savings mindset rather than one of spending and looking for greater efficiencies in their lives as they attempt to manage their finances under strain.
“Despite the more subdued consumer outlook for 2017, companies who are agile and are able to adapt or innovate their offerings to the changing consumer needs, can achieve success.”