The FNB/Bureau for Economic Research (BER) Consumer Confidence Index (CCI) plunged from -6 to -20 index points during the first quarter of 2025.
According to the BER, which released the latest index data on Tuesday, fieldwork for the survey commenced just days after Finance Minister Enoch Godongwana’s aborted proposal to hike VAT by two percentage points came to light on 19 February when his budget speech was postponed.
“The prospect of significantly higher taxes – either via VAT hikes or further bracket creep on the personal income tax front – likely alarmed many consumers. Even though the March budget, which took place after the fieldwork ended, softened the VAT hike, it still places a significant tax burden on consumers, which would have weighed on sentiment too,” the BER noted.
The souring of diplomatic relations between South Africa and the United States and the corrosive knock-on effects of the trade wars triggered by US President Donald Trump, likely also contributed to the extraordinary deterioration in sentiment.
“The 14-point plunge in the CCI during the first quarter of 2025 is on a par with the dramatic drop in consumer confidence when SA entered Stage 6 load-shedding for the first time in the first quarter of 2023,” the BER said.
“This time around there was also a brief return of stage 6 load-shedding, which could have contributed to the downtick in sentiment. The first quarter reading of -20 is also the lowest CCI reading since the first half of 2023 and signals an alarming deterioration in the outlook for consumer spending following the strong end to 2024.”
According to the BER, all three sub-indices of the CCI declined notably during the first quarter. The economic outlook sub-index of the CCI plunged from -9 to -32 index points, reversing nearly all gains made from the improvement in electricity supply and the establishment of the government of national unity in mid-2024.
The household finances sub-index of the CCI slumped from 11 to -1, while the sub-index measuring the appropriateness of the present time to buy durable goods such as vehicles, furniture, household appliances and electronic goods, retreated from -21 to -28.
A breakdown of the CCI per household income group showed that sentiment soured significantly across all income groups.
The confidence levels of high-income households earning more than R20 000 per month tanked the most, with their confidence reading plummeting from -4 to -30. The vast majority of high-income households now expect SA’s economic performance and their own household finances to deteriorate over the next twelve months, a complete turnabout from their expectations just three months ago.
The confidence levels of middle-income households earning between R5 000 and R20 000 per month and low-income households earning less than R5 000 per month declined from -7 index points to -19 and -17 respectively.
Following a surge in retail sales during the festive season, the outlook for household expenditure has deteriorated notably, according to the BER.
FNB Chief Economist, Mamello Matikinca-Ngwenya, said consumer confidence had been hard hit by the geopolitical climate and rising taxes.
“The boost from two-pot retirement fund withdrawals will be significantly less during 2025 compared to the roughly R40bn paid out in 2024, while Trump-triggered trade wars and rising global uncertainty are reducing the likelihood of further interest rate cuts,” he said.
“The withdrawal of all US aid to SA and the rapid deterioration in diplomatic relations with the US would also have knocked consumer confidence, but the biggest blow to consumer sentiment likely emanated from the National Treasury’s tax proposals and the discord among GNU partners.”
He said although the two percentage point VAT hike option had been shelved, the budget tabled on 12 March still called for a one percentage point VAT hike over two years and no inflation adjustments to income tax brackets and medical aid tax credits, for the second consecutive year.
“Above-inflation increases to social grants and the expansion of the zero-rated VAT basket should partially shield low-income households, but, if implemented, these tax proposals will deal a significant blow to the financial positions of high-income households,” he said.
However, bolstered by low inflation, interest rate cuts and generous two-pot retirement withdrawals, real consumer spending grew 2.3% year-on-year in the fourth quarter of 2024, more than double SA’s fourth quarter of 2024 real GDP growth rate of 0.9% year-on-year.
Results from the BER’s trade surveys suggest that consumer-linked sectors continued to fare well during the first quarter of 2025, but the sharp fall in the FNB/BER CCI points to tougher times ahead.
“The consumer has been the growth engine of the South African economy over the last decade – whereas real consumer spending grew by 11.2% (cumulatively) between 2015 and 2024, real GDP excluding consumer spending, showed no growth whatsoever over this timeframe,” the BER noted.
“Given the stark underperformance of the production and investment sides of the SA economy, the collapse in consumer confidence and deterioration in the outlook for household consumption expenditure should set alarm bells ringing in terms of SA’s economic prospects.”
