Consumer confidence in South Africa dropped to the lowest level in 14 years in the three months through June as power outages and increasing fuel prices dented the outlook for the economy.
The consumer confidence index slumped to minus 15 in the second quarter from minus four in the first three months of the year, FirstRand’s First National Bank unit said in an e- mailed statement on Thursday. The sub-index measuring sentiment on the economy’s prospects declined by 14 points to minus 24, the lowest level since the 1992-93 recession.
Rolling power blackouts, a weaker rand, higher gasoline costs and job cuts are hurting consumers and curbing their willingness to spend. That may limit growth in Africa’s second- largest economy, which the government estimates will expand 2% this year.
“A confluence of adverse economic developments is expected to put renewed downward pressure on the spending power of households from the second half of 2015,” Sizwe Nxedlana, chief economist of FNB, said in the statement.
The median estimate of five economists surveyed by Bloomberg was for the index to stay unchanged.
Rising gasoline prices and a weak rand pushed the inflation rate to 4.6% in May, threatening the central bank’s 3% to 6% target. The bank has indicated it will raise the benchmark interest rate from 5.75% in coming months.
“South Africa is currently experiencing the worst drought since 1992 — putting significant upward pressure on domestic grain prices — while electricity and fuel prices are set to rise further,” Nxedlana said. “The odds of interest-rate hikes during the second half of 2015 have increased.”
The rand has weakened 6.3% against the dollar since the start of the year and was trading as low as 12.3468 in Johannesburg on Thursday.
The consumer confidence index is compiled for FNB by the Bureau for Economic Research, based in Stellenbosch, near Cape Town.