BUSINESS AND CONSUMER SPENDING IS IMPORTANT TO BOOST THE ECONOMY, SAYS SEIFSA
Johannesburg, 19 July 2017 – South Africa’s ailing economy desperately needs an increase in business and consumer expenditure if it is to stabilize, Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Junior Economist Roberta Noise said today.
Commenting on the June 2017 Consumer Price Index (CPI) data released by Statistics South Africa, which declined to 5.1% from 5.4% in May 2017 on an annual basis, Ms Noise said the ongoing easing of the CPI was a positive development since the index continued, for the third consecutive month since 2015, to be within the 3-6% band-width set by the South African Reserve Bank. However, she cautioned that a decrease in inflation is a sign of a decrease in economic growth, which is fuelled by spending.
“The decline in the CPI is as a direct result of the low consumer confidence environment currently at play, which is indicative of lower spending patterns. The Consumer Confidence Index, as published by FNB/BER, has contracted for the second consecutive quarter at -9 index points and has been at its lowest streak since the inception of the index.
“Contributions to the annual decline are seen in discretionary goods like restaurants, hotels, as well as clothing and footwear both contributing a negative 0.1 percentage points,” Ms Noise said.
She said the 0.2 % monthly increase was mainly driven by housing and utilities, which encompass the rental and basic utility-type goods. This confirms that the decline in prices is related to the decline in spending, she said.
“The current expenditure occurring is for more necessity-type goods, with a host of multinational retail stores announcing their departure by the end of the calendar year as a result of the low consumer spending appetite. Confidence in both the consumer and business spending environment needs to be restored,” Ms Noise said.
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