Too much debt weighing on consumer finances: index

The finances of South African consumers are under pressure from too much debt and consumers spending more than they earn‚ a survey into the financial vulnerability of consumers found on Wednesday, 11 February.

By Ntsakisi Maswanganyi

12 Feb 2015

Too much debt weighing on consumer finances: index

The benefits of lower fuel prices‚ which have helped boost disposable incomes and finances‚ were not being felt by all consumers. The index showed that public transport costs increased by 7.4% in the fourth quarter of last year.

Credit solutions firm MBD's consumer financial vulnerability index found that consumers' debt-servicing capabilities remained their biggest concern and cause for financial vulnerability in the fourth quarter of last year. This was mainly due to the cumulative 75-basis-point increase in interest rates last year.

Banks' decisions to be stricter on credit extension also played a role in financial vulnerability.

Bureau of Market Research (BMR) economist Jacolize Meiring said the pressure on consumer finances was intensified by prolonged labour strikes‚ some substantial price increases and slow employment growth that negatively influenced income levels.

The index declined slightly to 51.2 in the fourth quarter of last year from 51.4 points in the previous quarter.

Ms Meiring said a reading of 50 to 59.9 meant consumers were feeling mildly exposed financially.

"Mildly exposed means they are not feeling secure or very vulnerable in their finances‚" she said.

The index measures the cash flow vulnerability status of consumers by measuring how vulnerable they are when it comes to income‚ expenditure‚ savings and debt servicing. Information was collected from 102 institutions including municipalities‚ credit providers‚ banks and cellular phone companies.

The index research was conducted by the BMR and the department of taxation at Unisa on behalf of MBD.

Source: BDpro

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