Consumer confidence in Africa dropped by one point in January as the index moved from 13 to 12 points driven by a drop in the index of future expectations which fell by 2 points.
Unlike in December, the performance of household indices was mixed this month. Whereas, the household spending index rose by three points, the personal finance and household spending indices both dropped by a staggering 5 points, and the index of discretionary spending faltered by a point. Additionally, while the job prospects index declined by a point, the general country economic conditions index rose by a point and the general city economic conditions index soared by 5 points and the job prospects index declined by a point.
Considering the performance of individual countries, consumer sentiment declined in four out of the seven countries tracked. These include Ivory Coast, Kenya, Nigeria and Tanzania. The worst performer was Ivory Coast as its index went down with 15 points from 16 to 1. Interestingly, consumer confidence in South Africa heightened for a fifth consecutive month with the index acquiring another 14 points rising to 32 from 18.
During the first month of the year Kasi global index of consumer sentiment slightly dropped. This drop is the second consecutive month the index is faltering; in December there was also a one-point drop. This drop was majorly influenced by a 2-point drop in the index of future expectations.
While African countries are trying to recover from inflation, there are still experiencing inflationary pressures that seem to be bringing consumer sentiment down. For example, the move by the Nigerian government to launch new bank notes has frustrated a number of consumers in the country. As a result, Nigerians have been unable to obtain cash in recent weeks after the country’s central bank began replacing currency notes with larger values of 1,000 naira ($2.16), 500 naira ($1.08), and 200 naira (43 U.S. cents) with redesigned ones.
Since the New Year, a series of legislative changes and economic reports have affected Kenya’s investment prospects. Kenya’s ultra-aggressive taxation policy, which include increasing capital gains taxes from 5% to 15%, has discouraged investment, making investors to sell their holdings to invest abroad. Additionally, the paucity of dollars has resulted in the development of a parallel black market in Kenya. Currency rates in the black market are significantly higher than those offered by official banks. Individuals and corporations have been stockpiling dollars because it is widely assumed that they are a relatively steady store of value, even while interest rates have risen month after month. Further, the country’s monetary and fiscal tightening has caused enterprises to reduce operations or relocate entirely.
Inflationary pressures continue to weigh down household indices.
The purchasing power index improves, general economic conditions in the country remains constant while household income, personal finance, general economic conditions in the city and discretionary spending indices decline. The performance of the household indices in January reflects the true situation of African countries post the December festivities - inflationary pressures are still being felt in the continent. At the forefront is the realism of households on the general economic conditions. The country economic conditions index remained constant while the city economic conditions index dropped by a point descending from 33 to 32. Moving into 2023, consumers are skeptical about their future economic conditions improving.
Though there was an improvement in purchasing power by three points, both personal finance and household income indices dropped by 5 points . Interestingly, the job prospects index improved for the first time in three months as the index heightened by one point in January from -50 to -49. The index of discretionary spending continued to drop for a third consecutive month dipping by a point from 6 to 5. This highlights that the priority for households with the just started year is to obtain better jobs and meeting their regular expenses.
Irregular rains in Ivory Coast dampened consumer confidence while easing inflation continues to give consumer sentiment a boost in South Africa.
Considering the countries tracked by our index, South Africa was the best performing after improving by 14 points, followed by Cameroon with a 4-point increase while Ghana improved by 3 points. The other countries i.e., Tanzania, Nigeria, Kenya, and Ivory Coast experienced a drop. The most dropped being Ivory Coast with a slip of 15 points.
The consistent improvement of consumer sentiment in South Africa can be attributed to its indices of current conditions and future expectations which advanced by 11 and 14 points respectively. According to Statistics South Africa, the annual consumer inflation slowed for the third consecutive month, decreasing to 6.9% in January from 7.2% in December. A notable fall in the price of fuel was the biggest factor behind the dip in the headline rate. The fuel price index declined by 10.5% between December and January, dragging its annual rate down to 13.1% from 22.8% in December. A liter of 95-octane petrol (inland) cost R21,40 in January, down from R23,46 recorded in December. The price of petrol is now roughly at a level last seen in March 2022 (R21,60).
In Ivory Coast, the world’s leading producer of cocoa, bean harvests have slumped in its main ports of Abidjan and San Pedro since the beginning of the year as erratic and insufficient rainfall hit crop output. The drop was drastic and sudden as production was high in December and suddenly everything collapsed in January. According to Reuters, this drop in bean arrivals is expected to last until the end of the main harvest in February and March and might extend into the first two months of the mid-crop harvest in April and May if rains do not arrive with more regularity.
"Inflation is still impacting households in Africa even tough we are seeing inflation easing in some markets and consumers purchasing power improving. This is good news of retailers in 2023 as they may have more pricing power, lower input costs and a return to sales level pre-inflation."
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