ECONOMY
Consumer spending to remain strong
Posted Thu, 13 Oct 2005
Consumer spending will remain strong for at least the next year, but a high petrol price might erode households' purchasing power, First National Bank's consumer confidence index said on Wednesday.
FNB chief economist Cees Bruggemans said persistent high consumer confidence underpinned the continued strong growth in retail sales, new vehicle sales and residential building activity in the third quarter of 2005.
"Bar any unforeseen shocks, consumer spending will probably remain strong for the next year or so and even thereafter.
"However, there is a risk that the high petrol price will erode households' purchasing power."
The consumer confidence index, compiled by FNB and the Bureau for Economic Research, stayed at 17 points in the third quarter of 2005.
"This remains a very high reading and indicates a considerable majority of consumers expressing confidence about their prospects," Bruggemans said.
This was the third consecutive
quarter in which consumer confidence had maintained its elevated level, he said.
The likely direction of consumer confidence in coming quarters would be decided by factors including the oil price, employment gains, wage gains, asset market conditions, interest rates and possibly political events, Bruggemans said.
What was encouraging for household spending was the strong, ongoing show of confidence among the broad mass of consumers, he said.
"Overall, all dimensions of South African consumers continue to express very high confidence readings, quarter after quarter, something we haven't seen in decades.
"This is likely to underwrite ongoing strong economic performance in the coming twelve months."
Sapa
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