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05 JUNE 2018

South African consumers’ financial
vulnerability looking positive
for the first quarter of 2018

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South Africa’s “new political dawn” has had a positive impact on consumers’ feeling less financially vulnerable in the first quarter of 2018 (Q1 2018).

This encouraging economic behaviour is evident from the Momentum|Unisa Consumer Financial Vulnerability Index (CFVI) which improved to 52.6 points in Q1 2018 from 49.3 points in Q4 2017 and 46.9 points in Q3 2017 (see Table 1 below).

This new political dawn refers to President Cyril Ramaphosa being inaugurated as South African president during mid-February 2018. The expectation of millions of South Africans is that the “new political dawn” will translate into a “new economic dawn”, characterised by higher investor and business confidence, which would give rise to higher economic and employment growth rates and therefore lower levels of consumer financial vulnerability.

When analysing the four subcomponents of the CFVI (income, expenditure, saving and debt servicing), the income index improved the most - from 48.9 points in Q4 2017 to 54.8 in Q1 2018. Consumers indicated that their income vulnerability reduced due to them expecting to be more able to retain or obtain employment during Q1 2018, that their income earning prospects improved and that they were more able to acquire money from family or friends.

The good news with respect to Q1 2018 is that all four consumer financial vulnerability sub-index scores were in the mildly exposed territory during Q1 2018, compared to three of the four sub-indices being in very exposed territory during Q4 2017.

Table 1 provides an overview of the changes in the quarterly scores of the Consumer Financial Vulnerability Index (CFVI) and its sub-components during Q1 2018 and the two preceding quarters. The measurement scale shows that overall consumers continued to perceive their finances to be mildly exposed.

Economic and political events that impacted consumers’ cash flow perceptions during Q1 2018

Consumer financial vulnerability (at the micro-level) is influenced by macro- and micro-economic variables. Such variables include:

  • Retail sales growth was 4.8 percent higher in March 2018 compared to

    a year before.

  • The number of employed grew by 1.3 percent from Q4 2017 to Q1 2018.

    Strong employment growth occurred over this period in the

    manufacturing (3.3 percent), construction (2.9 percent) and

    community and social services (2.6 percent) sectors.

  • Slower year-on-year consumer price inflation rates for

    (4.1 percent in Q1 2018 vs 4.7 percent during Q4 2017) improved the

    spending space for many cash strapped households.

  • Household credit extension increased by 1.3 percent during Q1 2018.

    Of specific interest is the fact that mortgage advances grew by

    1.2 percent during this period which is indicative of increasing consumer

    confidence giving rise to higher levels of fixed capital formation by households.

  • The average Rand-Dollar exchange rate improved from

    R13.17 in December 2017 to R11.84 in March 2018.

Table 1: Quarterly Overview of CFVI and its sub-components

A graphic table representing Consumer Financial Vulnerability Index components such as Income and Savings in the 3rd and 4th quarters of 2017 and Q1 of 2018.

Table 2: Measurement Scale of Consumer Financial Vulnerability Index

A graphic table representation of the Measurement Scale of Consumer Financial Vulnerability Index, rating categories from extremely secure to extremely vulnerable.


Momentum Unisa CFVI Q1 2018 Results

Momentum Unisa CFVI Q4 2017 Results

About the index

The term ‘Consumer Financial Vulnerability’ implies that consumers experience a sense of financial insecurity or an inability to cope financially. In essence, the CFVI identifies the specific financial sub-component(s) that consumers on average feel are causing stress to their cash flow positions. Therefore, it provides a window into the psyche of consumers and how vulnerable they are feeling with regards to their income, expenditure, savings, and debt servicing capabilities. Insights into consumers’ financial positions are vital to determine the extent to which economic growth and government programmes translate into improved financial stability of consumers. As a quarterly indicator, the CFVI fills an important information gap in South African data on consumer finances as viewed by consumers in the sense that it regularly provides updates as to the state of consumers’ financial vulnerability. The results of this release of the CFVI stem from research conducted by Unisa on behalf of Momentum. The results of this release of the CFVI are based on a selection of 112 key informants from relevant industries (including credit industry institutions, retailers providing credit and municipalities) that are able to gauge consumers’ financial perceptions.


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