20171207-法国巴黎银行-South_Africa__Durable_consumers_8页_413kb

South Africa: Durable Consumers Summary

Core Content

The document analyzes the state of South African consumer behavior and its implications for economic growth, focusing on recent trends in retail sales, inflation, credit flows, and consumer confidence. It highlights that despite weak consumer confidence and limited credit availability, South African consumers are showing resilience in their spending habits, which could support GDP growth in 2018.

Main Points

1. Improved Consumer Health

• High-frequency data suggest South African consumers are in better shape than expected.
• "All other retail" sales have shown robust growth, reaching a record high of over 20% on a three-month annualised basis in September.
• This category includes online shopping, which is gaining traction and contributing to the growth.
• Inflation in semi-durable and durable goods has been well-contained, helping to preserve real disposable incomes.

2. Credit Flow Constraints

• Credit extension remains limited due to stricter regulations and lower interest rates on unsecured loans.
• Credit flow ratios have been tracking sideways, indicating subdued demand and supply.
• The number of consumer credit accounts has declined significantly since 2016, suggesting a deleveraging trend among households.

3. Positive Wealth Effects

• The wealth-to-income ratio for South African households has shown a recovery from the 2009 recession.
• The strong performance of the domestic equity market, especially with companies earning from offshore operations, has bolstered consumer confidence, particularly among upper-middle-income households.
• This has indirectly supported consumption, especially in durable and semi-durable goods.

4. Resilient Consumption Amid Weak Confidence

• Despite consistently negative consumer confidence indices since 2012, household consumption spending has remained resilient.
• Real household consumption growth reached 2.6% q/q in Q3, up from 4.7% in Q2, indicating a slight improvement.
• If the outcome of the ANC leadership conference in December is perceived positively, it could further boost consumer sentiment and spending.

5. Inflation Outlook for 2018

• The document forecasts inflation to moderate to 4.8% in 2018 from 5.3% this year.
• Service prices continue to be the main driver of inflation, while durable and semi-durable goods inflation is more subdued.
• This trend is expected to support real disposable incomes and, consequently, consumption growth.

6. Sustainability of Consumer Trends

• The sustainability of the improved consumption data is uncertain.
• The global equity bull market may continue to support consumer confidence and spending, but this is not guaranteed.
• The "Amazon effect" from online shopping could help contain inflation in the medium term, though its impact is still developing.

7. Reduced External Vulnerabilities

• Improved consumer spending and deleveraging have helped reduce the current account deficit.
• The deficit is expected to shrink to 1.8% of GDP in Q3 from 2.4% in Q2, which is a positive sign for the economy.

Key Information

• Online shopping is a growing contributor to retail sales, with major retailers like Takealot.com reporting significant growth.
• Inflation in durable and semi-durable goods is lower than overall CPI inflation, which supports real consumer spending.
• Consumer confidence remains weak, but spending is showing resilience, which could be a signal of improved economic conditions.
• Consumer balance sheets are improving due to deleveraging and lower debt levels.
• The ANC leadership conference in December is a critical event that could influence consumer sentiment and GDP growth in 2018.
• GDP growth is expected to remain modest in 2018, with a slight increase from 1.0% to 1.1%, supported by private consumption growth rising to 1.6%.

Charts Mentioned

• Chart 1: "All other retail" driving up sales
• Chart 2: Retail inflation vs CPI inflation
• Chart 3: Vehicle sales picking up speed
• Chart 4: Solid spending on durables and semi-durables
• Chart 5: Credit 'flow' ratio remains subdued
• Chart 6: Fall in consumer credit accounts
• Chart 7: Consumer finances looking a little healthier
• Chart 8: 'Wealth effects' still lending a hand

Conclusion

South African consumers are showing signs of improvement in financial health and spending, driven by well-contained inflation, positive wealth effects, and increased online shopping. While consumer confidence remains weak, the economic outlook for 2018 is cautiously optimistic, particularly if the ANC conference results are favorable. The sustainability of these trends depends on ongoing macroeconomic conditions and the continued performance of the stock market.