SA's sentiment split — rich rebound, poor left behind

Daily Maverick

3 days ago

Depending on who you believe, consumer confidence is back, but with one crucial qualification — it's still negative.
After plunging in Q1, South Africa's Consumer Confidence Index (CCI) is back up, but only for some. A sharp rebound in middle- and upper-income sentiment signals short-term resilience, but low-income households are still squeezed. The CCI isn't just sentiment – it's about who spends, and who can't.
Wait, what is the CCI?
The quarterly CCI compiled by First National Bank (FNB) and the Bureau of Economic Research (BER) is meant to measure how South Africans feel about three key questions:
The country's economic outlook.
Their own household's financial situation.
Whether it's a good time to buy big-ticket items such as furniture or appliances.
Each quarter, 500 adult South Africans are contacted via phone interviews across representative demographics to ask these questions – and the result reflects the net balance: the percentage of those who feel optimistic minus those who feel pessimistic.
Old Mutual Wealth's chief investment strategist, Izak Odendaal, summed up the current sentiment succinctly: 'The economy is growing – but people don't feel good about it.'
Rebound from close to rock-bottom
In Q1 of 2025, the CCI plummeted from -6 to -20, a downturn driven by a mix of domestic political instability and international pressure.
The proposed VAT hike and subsequent withdrawal, Budget-related infighting between ANC and DA partners, a short but sharp return to Stage 6 loadshedding and Donald Trump's revived tariff aggression towards South Africa all contributed to the collapse.
By Q2, the CCI had recovered to -10 – a marked improvement, but still well below the historical average of -1. A May rate cut helped lower debt servicing costs, inflation on durable goods was subdued and political tensions calmed. But sentiment remains fragile, and, like the economy itself, uneven.
At -10, the index is still far below its 30-year average – and firmly in negative territory.
The recovery, as detailed in the FNB/BER release, mirrors the structural realities of South African inequality. Confidence didn't rise evenly across the board, but rather tracked closely with income.
'People are basically saying everything around me is falling apart, but my own finances are okay,' continued Odendaal. 'That's the kind of dissonance we're seeing – and it might explain why they're still spending.'
Why this matters
In a low-confidence environment, people tend to cut back and spend less, prioritising essentials such as food and debt servicing. In a high-confidence environment, people spend more – especially on discretionary goods – and tend to make greater use of available credit.
The CCI is less of an economic mood ring and more a real-time proxy for spending power and economic activity on the ground.
One index, three economies
Among high-income households – those earning above R20,000 a month – sentiment surged from -30 to -11. While that's a significant gain, it's still not back to late 2024 levels. A lack of inflation-related tax bracket adjustments or new credits in Budget 3.0 may have capped the recovery.
Middle-income earners, between R5,000 and R20,000 per month, showed the strongest recovery: confidence climbed to -7, matching late 2024 levels.
This group likely benefited the most from the two-pot pension withdrawals, a 25 basis point rate cut, and lower fuel prices, alongside increased affordability of newer vehicle models.
Low-income households – those earning under R5,000 – barely moved. Confidence ticked up only two points, from -17 to -15. These households, the majority in South Africa, have little access to pension withdrawals or formal credit, and continue to feel the brunt of rising food inflation, unemployment and climate shocks such as the Eastern Cape floods.
'Given the deterioration in both the global and domestic economic outlook in recent months… it's not surprising that high-income confidence settled at a lower level,' said FNB Chief Economist Mamello Matikinca-Ngwenya, in the Q2 CCI release.
Despite the bleak sentiment data, consumer spending appears more resilient. 'Retail and vehicle sales are holding up – even though the CCI is currently lower than it was during the 2009 recession,' Odendaal noted.
Retail echoes and spending signals
What does a rebound in sentiment mean for the real economy?
Retail sales rose 5.1% year-on-year in April.
New vehicle sales jumped 30% in May.
Middle-class consumers are spending again – cautiously.
But this recovery comes with caveats:
The two-pot pension bump is a once-off.
Inflation is edging upward.
The bottom third of households remain under economic strain.
Confidence is not income – and that gap could widen if price pressures accelerate.
But what does this mean?
The latest CCI tells a story of fragile optimism, but only for those with buffers.
If you're middle or high income, you may be feeling more secure, and the data suggests you're already spending more. But if you're among the country's lower-income majority, those gains are unlikely to feel real.
Inflation, unemployment and rising food costs continue to erode financial confidence, while access to credit and relief remains unequal.
For policymakers, the message is clear: sentiment is recovering, but unevenly. Without equitable relief or targeted support, confidence may return only to those who need it least.
'The question is: is the economy growing? Yes, slowly. Are people happy? No. These are two different questions,' Odendaal said – a reminder that in economics, feelings and fundamentals don't always align. DM