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Spikes and dips in consumer spending

Reflecting coronavirus containment efforts, with longer term economic fallout yet to be felt.
With the lockdown continuing, and the resultant economic impact, it may be a while before consumer spending settles into a new normal. Image: Moneyweb

When social grant payments for April were made consumer behaviour briefly returned to normal based on point-of-sale transactions and ATM withdrawals processed by BankservAfrica, as indicated by point G on the following graph.

BankservAfrica spending volume data to April 5

Source: BankservAfrica and Economists.co.za

Until then, things had been anything but normal – and consumer spending has subsequently dipped again.

Sunday, March 15 saw President Cyril Ramaphosa announce a national state of disaster, with school closures, a partial travel ban, and gatherings of more than 100 people prohibited from March 18. By the following week, spending had declined from last year’s levels. At point D, spending had already fallen back 20% on a year ago.

On March 22, the president announced the 21-day lockdown aimed at flattening the curve of Covid-19 infections that would start at midnight on Thursday, March 26

The lockdown announcement came before grant recipients received their money, but those who were able headed to the shops in their numbers. This largely coincided with the biggest salary payment day, the 25th of the month. Consumer spending spiked, with consumers wanting to purchase whatever they might need to cushion the lockdown.

The scenes were similar to Black Friday, without the specials; people were stocking up in order to prepare for the lockdown, says BankservAfrica.

It reports that on March 25, consumer transaction volumes were 158% of normal spend this time last year. The figures rose even higher the next day, March, 26, at 172% of normal spend for a month-end payday (point E on the graph).

With the start of the lockdown, consumer spending then fell to 28% of normal levels (point F).

Then came the social grant payments, bringing normality to point-of-sale transactions and ATM withdrawals (point G). The South African Social Security Agency (Sassa) normally pays out grants at the beginning of each month, but the April payments were brought forward to March 30. The first two days were dedicated to those with disabilities and older people, to ensure compliance with the lockdown requirements. On March 30, consumer behaviour returned to “near-normal levels” for that time of the month, according to BankservAfrica, “with transactions reaching 98% of typical spend point”.

After two more days of social grant payments, at 60% of typical spend, it fell back to 45% – as one would expect during a lockdown period.

“This could have also been caused by the restricted movement, food items being limited to essentials only and some South African households coming under financial strain,” says Shergeran Naidoo, head of stakeholder engagement at BankservAfrica.

“This provides economic insights into the consumer impact of coronavirus,” he adds.

With Ramaphosa on Thursday night (April 8) having extended the lockdown a further two weeks – effectively to Friday, May 1 – and with the associated economic impact, it may be some time before consumer spending again returns to ‘normal’.

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