November 18, 2020 1:14 PM
KASI’s global CCI rebounded by 7 points this month after receding by 4 points in September. This upturn in consumer confidence can be credited to the growth of the future expectations index which rose by 10 points while the current economic conditions index stagnated at -29.
With the exception of the job prospects index which fell by 3 points, all the other sub-indices expanded in October. The largest gains were in the general country and city economic conditions indices which improved by 14 and 13 points respectively after experiencing the largest reversals last month. Purchasing power, household income, personal finance, and discretionary spending indices climbed by 10, 9, 4, and 2 points respectively.
None of the countries tracked in our global index witnessed a decline in their consumer confidence this month. After falling in September, Tanzania’s consumer confidence surged 31 points continuing its pattern of instability observed in recent months. The worst performing country was Kenya whose consumer confidence index remained unchanged from last month.
For the first time since the beginning of the pandemic in March, KASI’s global CCI moved into non-negative territory rising from -7 to 0. With the index of current economic conditions remaining static at -29, the improvement in consumer confidence can be fully attributed to the growth in the index of future expectations which grew by 10 points moving from 1 to 11.
Unlike the USA and several European countries where there are new waves of Covid-19, most African countries are not having a similar experience. As such, governments are easing Covid-19 restrictions with countries like South Africa permitting the arrival of international flights from October 1st, and, in Nigeria, schools were allowed to resume from October 12th. This has led to optimism about the future of economies in most African countries thereby fueling confidence among consumers.
As of 16th November 2020, the number of Covid-19 cases in Africa stood at 1,986,864 with 47,647 deaths and 1,676,584 recoveries
Optimism on general country and city economic conditions grows among households despite weakening job prospects.
Households were more optimistic about the state of the economy and their financial situation in October. This is illustrated in the recovery of the indices tracking general economic conditions in the country and in the city both of which heightened by 14 and 13 points respectively due to the continued reopening of most African economies. Despite this, job prospects remained dreary for most households as the index dipped by 3 points from -51 to -54. The pandemic has forced many small businesses to permanently close down and a majority of these businesses are in the informal sector which employs a greater proportion of the African population. Even with the easing of restrictions, only a small number of these businesses will reopen thus fewer opportunities for employment hence weaker job prospects. Nevertheless, the prevailing macroeconomic conditions including low inflation and low-interest rates are favorable for households. The purchasing power, household income, personal finance, and discretionary spending indices increased by 10, 9, 4, and 2 points respectively.
Consumer confidence in Tanzania continues its pattern of instability while Kenya’s consumer confidence remains unchanged.
There was no deterioration in consumer confidence among the 7 countries tracked in our index. Although Tanzania’s consumer confidence was the best performer in October, its trend of instability observed in recent months extended into October and this continues to make life difficult for retailers operating in the country. The consumer confidence index revived by 31 points in October after plummeting by 22 points in September. This recovery of consumer confidence was led by the increase in Tanzania’s future-expectations index which advanced by 44 points while the current-economic conditions index moved up by 1 point. With the presidential elections concluding in October and the incumbent President Magufuli claiming victory for a 2nd term, there was elation in the general economic conditions for both the country and city as the indices expanded by 59 and 60 points respectively. Household income, purchasing power, discretionary spending, and personal finance indices grew by 59, 38, 12, and 4 points respectively. Akin to the global job prospect index, Tanzania’s job prospects index decreased by 11 points this month. These trends in the various indices for Tanzania matched those of the continent.
Meanwhile, Kenya’s consumer confidence index was the laggard of the month as the index did not change from last month. With the government easing restrictions in late September, Covid-19 cases spiked in October leading to additional concerns among households about the virus. Kenya’s Covid-19 Pulse shows that, between September and October, the proportion of respondents concerned about the virus rose from 57% to 62%. Furthermore, the proportion of respondents concerned about themselves or someone they know contracting the virus increased from 36% to 39%. These concerns did not help the job situation as there was a 2% increase in the proportion of respondents who found it difficult to find work in the city in which they reside. Moreover, the proportion of respondents who expected their incomes to worsen over the next 6 months climbed to 28% from 22% while those expecting their incomes to improved reduced to 34% from 35%.
With discretionary spending remaining low, the outlook for retailers in the essential goods space is much more positive.
Fortunately for Africa, the effect of coronavirus on human lives has not been as severe as it has been in other parts of the world notably the US and Western Europe. However, with globalization and the interdependence of economies, Africa has not been spared from the economic effects of the pandemic and with some countries reinstating lockdown protocols, the impact is yet to be fully realized. Retailers whose operations are mostly within the continent will fare better through this period as their operations will not be affected by lockdowns in the other parts of the world. While governments in Africa are slowly reopening the economies, weakening job prospects means that expenditure on durable goods that are more costly will remain low. Therefore, retailers in the FMCG and essential goods space shall do better than those in the durable goods sector due to spending priorities for households.
“Sadly, the effect of the pandemic on businesses means that households are facing weaker job prospects as some businesses will not reopen even with restrictions being lifted. As such, spending on non-essentials will remain subdued which is not good for retailers in this space” said Davies Nyachienga, Economic Intelligence Group at KASI.
About the methodology
KASI Consumer Confidence Score (KASI CCI) is a composite index compiled from a seven-question survey that runs monthly via our consumer polls in the countries covered. The data output is based on a fresh, randomly selected representative sample of city dwellers aged 18-64. Released the first week of every month, KASI CCI provides a focused view on consumer perceptions in seven African urban centers (Ghana, Nigeria, Kenya, South Africa, Cameroon, Ivory Coast, Tanzania) where most spending in the continent is concentrated.
For each question, the final metric will be a ‘balance measure’ of the percentage of positive responses minus the percentage of negative responses. The overall metric will be an average across all the questions.
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