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South African Consumer Confidence Falls

James Boston
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South African Consumer Confidence Falls

Consumer Confidence in South Africa has returned to negative territory according to the latest data for the third quarter just released. The Q3 reading came in at -1.0 compared with the 4.0 experienced for the second quarter of the year, analysts had forecast a reading of 1.2 today. This latest announcement means that South Africa has only had two quarters of positive consumer sentiment during the last three years, including a very slight positive blip in the middle of 2013.

Consumption led growth has slowed significantly in South Africa over the past two years, a failure to create employment and a spate of industrial unrest are the primary reasons consumers are proving both unwilling and in many cases unable to spend. Like many emerging economies, South Africa is badly in need of structural reform, this however is proving very difficult to implement. Government battles with labour unions crippled the economy for much of the first two quarters of this year as the all important mining industry shut down, taking out much of the secondary manufacturing industry in the process. This protracted battle has caused significant reputational damage to South Africa which has not only lost customers but also vital investment.

The South African economy has recently been overtaken by Nigeria as the largest on the African continent, and very narrowly avoided slipping into recession in the second quarter of this year. The Q2 growth statistic of just 0.6% followed a first quarter contraction of -0.5% and was enough to stave off a technical recession for the time being. The South African Reserve Bank (SARB) has already lowered it’s full year growth forecast to just 1.7% from it’s previous level of 2.1%, not only is this new growth projection below the final rate achieved in 2013, it remains difficult to see how this target can be achieved given the slow recovery from the sluggish first half of 2014.

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