Despite inflationary pressures, consumer sentiment stabilizes in the last quarter of 2022.
Consumer confidence in Africa dropped by one point in December as the index moved from 14 to 13 points. This was caused by a slip in the index of current economic conditions which fell by 3 points.
The household indices performed fairly in December. Although household spending and household income indices rose by 1 and 8 points respectively, the personal finance index plummeted by a staggering 15 points while the index of discretionary spending faltered by 6 points. 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 Cameroon, Tanzania, Nigeria, and Ivory Coast. The worst performer was Cameroon as its index diminished by 10 points from 0 to -10. Concurrently, consumer confidence in South Africa heightened for a fourth successive month with the index acquiring another 19 points rising to 18 from -1.
During the last quarter of the year Kasi global index of consumer sentiment stabilized. Though there was a one-point increase in November, the index returned to 13 points as it was in October. This stabilization was majorly influenced by the realistic consumer outlook among households on the future economic condition as the index stagnated at 27 points.
Regardless of the high inflation levels that were witnessed throughout the year, consumer sentiment in Africa seems to be improving. For example, in Kenya the Kenya National Bureau of Statistics (KNBS) recorded inflation levels of 9.1% in December, a fall from the 9.5% recorded in November. In addition to inflation, the depreciation of local currencies against the dollar has worsened the economic situation on the continent. In Cameroon for example, based on Autonomous Amortization Fund (AAA), the country’s debt manager, the fluctuation of the Central African CFA franc against the dollar has increased the outstanding public debt of Cameroon by an average of 35 billion each month from June 2021 to July 2022. Since the first quarter of 2022, the situation has deteriorated.
Inflation continues to weigh in household personal finance while positive trend of easing inflation provides a boost to purchase power and economic outlook
The personal finance index drops while household income, general economic conditions in the country and purchasing power indices improve. The performance of the household indices in December reflects the recovery of African economies from the tough economic conditions. At the forefront is the optimism of households on the general economic conditions. The country economic conditions index moved up by a single point while the city economic conditions index increased by 5 points ascending from 28 to 33. Usually, consumers are expected to travel to rural areas during the holiday season, but most found it easier to stay in urban areas. This may be attributed to the high transport costs caused by inflation on the continent.
Though there was an improvement in the purchasing power and household income indices with 1 and 8 points respectively, the personal finance index crumbled by 15 points receding to 15 from 30 suggesting that consumers are living beyond their budget (inflation pressure). Unfortunately, the job prospects index continued its downward trend from November as the index dropped by one point in December from -49 to -50. Discretionary spending was also reduced in the month with the index dipping by 5 points from 11 to 6 highlighting that the priority for households is to ensure they can manage their regular expenses.
Food insecurity in Cameroon dampened consumer confidence in the country outlook while easing inflation gives consumer sentiment a boost in South Africa.
South Africa was the best performing after having a 19-point boost, followed by Kenya with a 3-point increase while Ghana maintained its 13 points. The other countries i.e., Tanzania, Nigeria, Cameroon, and Ivory Coast experienced a drop. The most affected being Cameroon with a slump of 10 points.
The boost in consumer sentiment in South Africa can be attributed to its index of future expectations which advanced by 23 points. Moreover, its index of current conditions improved by 11 points. According to the Bureau for Economic Research (BER), this can be attributed to a rise in consumers’ propensity to spend in the last quarter when compared to the initial quarters. This significant improvement in consumer sentiment is good news for the economy and suggests that household consumption expenditure is holding up despite tough economic conditions.
In Cameroon, inflationary shocks like food insecurity continue to hit the country. According to the United Nations, the conflict experienced in the Northwest and Southwest parts of the country has led to a reduction of grain stock in the affected households making them rely on market purchases as their primary source of food. However, the current capacity of poor households to access food from the market is lower than last year. Further, income from crop sales is seasonally lowest and incomes from livestock sales, labor, and coping strategies like sales of charcoal/firewood, stone cracking, and hawking are insufficient to keep up with the rising prices of basic food and non-food commodities. Food insecurity continues to limit income-earning opportunities, and most poor households are using their minimal earnings to repay accrued debts.
Moving into 2023, retailers should be optimistic as consumers are coming up with ways to deal with inflationary pressures.
Consumer sentiment in the last quarter of 2022 steadied, which is quite encouraging for retailers. Though inflation still lurks in each country, consumers are finding ways to deal with it. This has enabled them to recover from the initial shocks observed in mid-2022. The data showed household incomes are holding up. However, while the purchasing power and household income indices improved, the personal finance index dipped due to inflation pressures that still lingered. Moreover, the data also suggests that the priority for households was to minimize their expenditure on discretionary items and use these funds to meet their regular expenses/purchases.
"Last week, the International Monetary Fund (IMF) raised its growth forecasts for the global economy slightly for 2023 to 2.9% from 2.7% in its October World Economic Outlook report. Perplexingly, it also raised its forecast for South African growth by 0.1 percentage point to 1.2% – a forecast that seems barely credible. But looking at our consumer sentiment trend, this forecast may not be that far fetched."
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