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Marketing South Africa

Consumer confidence at record high in SA

Results of the MasterIndex of Consumer Confidence survey for the first half of 2006 reveal that South Africa consumer confidence has jumped to a two and a half year high and is strongly positive. The current South African MasterIndex score of 91.1 out of a possible 100 is up more than 25% up on the 71.2 score received six months ago, indicating strong consumer optimism and confidence.

For the first time since the inception of the survey in 2004, the MasterIndex for South Africa was among the highest for countries surveyed in South Asia, Middle East and Africa (SAMEA). Overall consumer confidence in South Africa has overtaken India, Saudi Arabia, as well as the United Arab Emirates. Only Kuwait returned a higher level of consumer confidence than South Africa.

Putting the results of the survey in context, economist Mike Schussler of T-Sec said: "Perhaps South Africa's golden era has turned into the platinum era. Two years of GDP growth over 4% , a third consecutive year very likely in 2006, plus talk of 6% growth, must make for a big change in attitude of ordinary South Africans, who had become used to 1% to 2% GDP growth. Moreover, South Africa is now in its longest economic upswing ever. The longer the upswing in the economy, the more confident consumers seem to become."

Commissioned by MasterCard International and conducted bi-annually in selected markets in South Asia, Middle East and Africa (SAMEA), the survey analyses consumers' perceptions of economic conditions over the six months ahead. The MasterIndex has a range of 0 to 100 with 50 as the mid-point. A score above 50 indicates that consumers are optimistic about the economic climate, while a score below 50 signals that consumers are pessimistic about the economic situation.

The countries surveyed include South Africa, Egypt, Kuwait, Lebanon, Saudi Arabia, United Arab Emirates and India. The scores are based on respondents' answers to questions relating to five variables: Employment, Economy, Regular Income, Stock Market and Quality of Life.

Significant increase

In all five categories, South Africa registered a significant increase.

The overall score of 91.1 out of a 100 is much higher than the score of 71.2 six months ago and South Africa's historical average of 74.4 in the MasterIndex survey.

Compared to the other six markets surveyed, South Africa scored highest in Economy (91.7 vs 69.1 six months ago) and Regular Income (98.0 vs 91.4); and second highest in Stock Market (90.9 vs 70.9), Quality of Life (89.8 vs 67.6) and Employment (85.3 Vs 56.8).

"The overall economy has seen record cars sales, house prices and credit growth, while a lot of banked individuals are seeing a general rise in wealth from the stock market to their property values. Low inflation also adds to the rise in consumer confidence," Schussler explained.

"All the MasterIndex categories have reached record highs. The consumer confidence is therefore not confined to one or two areas, but is a broad rise in confidence with South Africans even saying that the 'quality of life' has improved to nearly 90 points out of a possible 100."

"The Employment category has shown an 8.7 point improvement when compared with the first half of 2005. Although unemployment remains high, more and more people are finding work. This is not surprising, with the economy creating at least 357 000 formal sector jobs last year and probably over 600 000 jobs overall when the informal economy's job creation is taken into account," Schussler added.

"Lower inflation and stable interest rates have kept consumers in an upbeat mood. With better economic conditions, higher precious and base metal prices, and a host of other good data, South African consumers are reveling with pride. Barring severe oil or current account shocks, overall we expect higher GDP growth figures in both the first and second quarter as consumers continue to spend as their confidence remains high," Schussler concluded.

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