Households across Africa indicate a positive outlook for jobs and general economic conditions
Consumer sentiment in Africa rose by a single point in September following positive moves in the current economic conditions and future expectations indices both of which increased by 2 points.
With the exception of the household personal finance index which fell by 3 points and the discretionary spending index which did not change, all other household indices heightened this month with the job prospects index registering the largest growth of 4 points after a disappointing performance in recent months.
Among our list of countries, Cameroon, Ghana, Kenya, South Africa, and Tanzania all recorded gains in their consumer sentiment indices with Cameroon and Tanzania being the best performers of the group as their indices advanced by 6 points. Meanwhile, consumer confidence in Nigeria and Ivory Coast receded with Nigeria’s index sliding furthest by 4 points.
Kasi’s global CCI maintained the positive momentum observed in August as the index extended by an additional point this month rising from 10 to 11. The move is a reflection of optimism among households on the current economic conditions as well as that of the future as the respective indices both expanded by 2 points.
Covid-19 cases in Africa continued declining into September bringing an additional feeling of comfort and positivity among households which they had begun to experience last month. Furthermore, in some countries like Kenya, where cases have diminished significantly, economies are back on full throttle as curfews that restricted the movement of people and operation of restaurants and bars have been removed.
Apart from the decline in Covid-19 cases, the surge in global commodity prices is good news for commodity-exporting countries on the continent. According to the Director of Integration and Trade Division at the Economic Commission for Africa (ECA), the rise in commodity prices will result in increases in economic outputs and fiscal revenues for these countries. On the flip side though, high commodity prices pose a challenge for net commodity importers particularly with regards to food and energy commodities as they would be detrimental to the cost of living for consumers in these countries. Additionally, the strong dependence on global commodity markets for net exporting countries poses a downside risk if commodity prices were to collapse. Therefore, while the recent surge in commodity prices bodes well for commodity-exporting countries, there is a need to reduce their dependence on such commodities given their price volatility.
Households indicate a positive outlook for jobs and general economic conditions but their personal financial situation weakens
Akin to the global indices, the household indicators also revealed the positive sentiment expressed by African households this month. Most notably is the recovery in the job prospects index which, after tumbling for the past two months, realized a gain of 4 points climbing from -51 to -47 making it the best performer. The purchasing power index rebounded by all 3 points that it shed last month moving back to 13 from 10 while the household income index continued on its positive trajectory advancing by another 2 points in September. Households also reported an improvement in city and country economic conditions as both indices rose by 2 and 3 points respectively.
Unfortunately, not all household indices progressed in September. The personal finance index contracted by 4 points descending to 23 from 26 while the discretionary spending index stalled at 11 points. Evidently, households believe that the likelihood of attaining work in the coming months is higher which may be a reflection of the fact that the holiday season is approaching implying that retailers and the hospitality sector could need additional workers to meet the additional demand for their goods and services usually experienced during the holiday season. However, it is critical to keep an eye on the index to ascertain this notion especially because its performance in recent months has been abysmal.
Consumer sentiment in Nigeria slips after two successive months of growth while Cameroon and Tanzania see an upswing in their consumer confidence indices
Examining the countries tracked by our index, Cameroon, Ghana, Kenya, South Africa, and Tanzania all witnessed an improvement in the consumer confidence indices while Ivory Coast and Nigeria saw their consumer sentiment dwindle.
Cameroon and Tanzania recorded the biggest moves of the month equally climbing by 6 points. For Cameroon, following the floods that led to the sinking in its consumer confidence last month, the country has managed to bounce back. Its index of future expectations and index of current economic conditions both expanded by 5 and 3 points respectively. Moreover, apart from the job prospects index which remained unchanged, all of its household indices soared with the purchasing power, discretionary spending, and general country economic conditions indices advancing furthest by 12, 7, and 8 points respectively.
Meanwhile, in Tanzania, its index of current economic conditions swelled by 11 points while its index of future expectations increased by 4 points. Tanzania’s monthly inflation rate had a modest decline in September as its consumer price index fell to 103.71 from 103.80 registered in August. The decrease of the overall index is attributed to the price reduction for some food and non-food items including sorghum, cabbages, clothing, and firewood (National Bureau of Statistics of Tanzania, 2021). As a result, its spending indices rose sharply in September with the purchasing power index strengthening by 11 points and its discretionary spending index surging by 13 points. With the exception of the household income index which did not change, the remainder of the household indices also grew.
On the contrary, after leading in performance last month, Nigeria’s consumer sentiment deteriorated by 4 points making it the laggard of the month. Its consumer sentiment index sunk to 29 points from 33 following the deterioration in its index of current economic conditions and index of future expectations both of which worsened by 8 and 2 points respectively. Despite the recent improvement in Nigeria’s macroeconomic situation, the country continues to face some headwinds. While the price of crude oil has risen in recent months, Nigeria is struggling to find buyers for its oil, even among its main customers, with as much as two-thirds of its crude yet to be purchased.
What’s more, foreign direct investment (FDI) in the country has fallen to its lowest level in over 11 years. In fact, according to the capital importation report published by the National Bureau of Statistics, FDI dropped to US$77.97 million in Q2 2021, indicating a 49.6% and 47.5% decline compared to US$154.76 million and US$148.59 million recorded in Q1 2021 and Q2 2020 respectively. Consequently, the majority of its household indices slumped in September with the personal finance and discretionary spending indices registering the biggest losses at -13 and -15 respectively. Its job prospect index weakened by a point while both the general city and country economic condition indices softened by 4 and 3 points respectively. The only indices to heighten were the household income and purchasing power indices which respectively progressed by 3 and 2 points.
The rebounding of the job prospects index is a good sign for retailers as the holiday season approaches
For the first time in a while, the performance of indices lies more on the optimistic side with the majority of countries realizing positive changes to their consumer sentiment and most households in the continent have a positive outlook as conveyed by the household indices. This observation may be driven by the fact that countries in the continent are reporting fewer Covid-19 cases and as a result, governments are lifting the remaining restrictions that were imposed because of the pandemic as is the case in Kenya.
The most optimistic news though, is that of the job prospects index which, after plunging to its lowest level ever last month, has rebounded. This is particularly important as we approach the last quarter of the year because, if the expectation of higher job prospects is indeed realized i.e. more households obtain some form of paid work as they expect, retailers and those operating in the hospitality sector should expect greater consumption of their products in the approaching holiday season thus increased sales for these businesses. Nevertheless, it is critical to monitor this index in the coming months in addition to the discretionary spending index that remained unchanged this month. If both these indices expand, then businesses in the hospitality sector and those dealing with other discretionary products should have a wonderful fourth quarter in terms of business performance.
“ Given the current challenges facing global supply chains including the delays in shipping of products leading to shortages of products around the world, retailers must actively monitor the spending indices as well as their internal metrics on sales, especially with the holiday season fast approaching. This will be vital to plan accordingly so as to ensure that they are ready to meet the additional demand normally experienced during this season.” Davies Nyachieng'a
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