Consumer confidence finally picks up after a disappointing 1st Quarter

Updated: 2 days ago

May 31st, 2021-

  • KASI’s global CCI finally moved up by 6 points after tumbling in the past two months. The improvement in CCI follows a heightening in both the index of current economic conditions and the index of future expectations which rose by 3 and 7 points respectively.

  • The general country's economic conditions snapped back by 39 points after drastically declining to its lowest level ever last month. Job prospects, household income, and discretionary spending also increased in April while the general city economic conditions index stalled once again this month. On the other hand, the indices on purchasing power and personal financial situation dipped by 4 and 1 point(s) respectively.

  • Cameroon, Ghana, Ivory Coast, and South Africa all experienced expansions in their consumer confidence indices with Ivory Coast recording the largest gain of 22 points. Meanwhile, consumer confidence in Tanzania and Nigeria declined with Tanzania being the worst performer of the month. For Kenya, its consumer confidence stagnated at last month’s level.

For the first time in two months, consumer confidence in Africa advanced and moved back into positive territory as the index climbed from -2 to 4. The positive swing in consumer confidence can be attributed to the index of current economic conditions and index of future expectations as both indices grew by 3 and 7 points respectively.

Vaccine distribution remains to be a problem in the continent. According to the Africa CDC, the continent has received about 36 million doses with 22 million of the doses having being administered. For a continent with approximately 1.2 billion people, this is a serious shortfall. Moreover, the continent’s main supplier of the vaccine, India, has banned exports of the vaccine as Indian officials struggle to curb the virus which has ravaged the country in recent weeks. However, even with such a negative outlook, African households appear to be optimistic about the future.

Global demand for commodities is now picking up as the U.S. and Europe are emerging from the pandemic-induced lockdowns with their citizens having been inoculated. Despite this growth in demand, supply for commodities is still low as the supply chain disruptions caused by the pandemic are still present. This combination of growing demand and inadequate supply has caused the prices for commodities to surge including those for metals, oils, and agricultural products. Given that the African economy is commodity-dependent and mainly exports commodities, the increase in prices bodes well for the continent as this potentially means higher export revenues and greater income for individuals involved with commodities hence driving up consumer confidence.

Job prospects and discretionary spending maintain positive momentum as optimism on economic conditions snaps back.

There were mixed results in the sub-indices tracking the economic and financial situation for households. After falling to its lowest level ever in March, the general country economic conditions index rebounded by 39 points rising to 11 from -28. The job prospects and discretionary spending indices maintained their positive momentum from last month extending by an additional 4 and 2 points respectively. Households indicated a modest improvement in their income situation as the household income index ticked up by a single point after stalling in March. Meanwhile, the general city economic conditions index remained unchanged maintaining the same level for three consecutive months. The purchasing power index deteriorated this month falling by 4 points erasing its gains from last month while the household personal financial situation index also stumbled by a single point. The continued rise in job prospects and an optimistic outlook for economic conditions in April appears to have caused consumer confidence to bounce back this month.

Consumer confidence in Ivory Coast soars amid a positive outlook while Tanzania sees a contraction in its consumer sentiment.

Performance in consumer confidence among the countries tracked by the index was also mixed with Cameroon, Ghana, Ivory Coast, and South Africa registering increases in their indices while Tanzania and Nigeria witnessed a slump in their indices. Kenya was the only country whose consumer confidence did not change in April. Among the countries whose consumer confidence rose, Ivory Coast recorded the largest increase, climbing 22 points from -4 to 18. The expansion of its consumer confidence can primarily be attributed to the growth in its index of future expectations which soared by 30 points while the index of current economic conditions rose by a single point. According to the IMF, the Ivory Coast economy is set to expand by 6.5% in 2021 putting the country exactly where it was before the crisis. In eight years through 2019, Ivory Coast’s GDP was only second to Ethiopia as the continent’s fastest-growing economy after more than a decade of civil conflict. These projections are also reflected in the surges of its sub-indices all of which strengthened this month apart from the job prospects index. The general economic conditions index for the country and city rocketed by 65 and 25 points respectively while the purchasing power, discretionary spending, household income, and personal finance indices swelled by 21, 9, 26, and 13 points respectively.

Tanzania’s consumer confidence was the worst performer for the month as the index fell by 8 points compared to Nigeria’s decline of a single point. The slump in Tanzania’s consumer confidence is linked to the sharp drop in its index of current economic conditions which sunk by 25 points while its index of future expectations slid by a single point. In April, the annual headline inflation rate rose to 3.3% after falling in March following an increase in the prices of food and non-alcoholic beverages whose inflation climbed from 4.2% in March to 4.8% in April. Additionally, some non-food items such as petrol and diesel saw their prices increase by 7.2% and 6.1% respectively. This rise in the cost of essentials affected households’ current economic and financial situation. Focusing on Tanzania’s sub-indices, only the general country economic conditions and personal finance indices ascended in April. All the other indices receded with household purchasing power registering the biggest downturn of 38 points followed by the discretionary spending index which shrunk by 33 points. The job prospects, general city economic conditions, and household income indices weakened by 18, 12, and 5 points respectively.

With brand loyalty being fickle, retailers must ensure their products are available as consumer spending picks up.

Fortunately, we have seen an immediate reversion of the general country economic conditions index after it fell to its lowest level last month. To add to this positive news, job prospects and discretionary spending have maintained their forward momentum witnessed last month while household income has improved albeit modestly. Though we may not be out of the clear yet and value for money would continue to be the primary consideration as households’ purchasing power and personal financial situation is still bleak, the outlook does appear to be positive. Evidently, it is important for retailers, especially those in the discretionary and leisure space, to effectively prepare their supply chains so that if this positive momentum heightens and is sustained, they are ready to improve the consumers’ financial situation. At a time when brand loyalty is fickle, customer retention is critical, and to achieve this, retailers must ensure that their products are readily available and accessible otherwise they may jeopardize the preservation of their customer base. As it is well known, “it is better to be prepared for an opportunity and not have one than to have an opportunity and not be prepared.”

As global demand increases, the African economy will benefit as demand for raw materials used in production shall expand. However, the push by African states to promote local manufacturing by multinationals could prove to be difficult as firms may opt to localize certain stages of production to avoid supply chain disruptions in the event of a global catastrophe such as the pandemic.”

By Davies Nyachieng'a, Economic Intelligence Group at KASI.

#Covid19 #Economy #Kenya #Cameroon #Nigeria #Ghana #IvoryCoast #Tanzania #SouthAfrica

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