Last week’s post explained how to interpret economic indicators using gross domestic product as an example. This week, we’ll examine consumer confidence measures.

Who are the biggest spenders in South Africa? Want to guess government? You’d be wrong. How about business? Wrong again. The correct answer is us. It’s not even close. South African household spending makes up a whopping 60 percent of the overall economy. So as you might imagine, businesses and investors spend a lot of their time worrying about how we consumers are feeling. They’re not motivated by altruism, mind you, but rather by profit. You see when consumers feel better, they spend more.

Despite that fact, most economic indicators measure actual behaviour, for example how much we’ve spent and on what. Very few actually bother to ask “how are you feeling?”

In America, the Conference Board and the University of Michigan do it. Across parts of Europe, market research group GfK does it. Here in South Africa, two surveys are widely followed. The MasterCard Worldwide Index of Consumer Confidence, released half-yearly, and the First National Bank-Bureau for Economic Research Consumer Confidence Index (FNB/BER CCI), published quarterly.

How does this indicator work?
All these indices work similarly. They survey consumers, by telephone or in person, asking them how they feel about their current economic circumstances and how they feel about the future. The responses are weighted (assigned various scores), tallied and an average number is generated.

Generally speaking, a higher number means that consumers are optimistic. For example, if the FNB/BER consumer confidence index rises from 11 in the first quarter to 13 in the second quarter, consumers believe things are improving. The reverse also holds true. If the index value drops, then consumers’ confidence is waning.

Here in South Africa, the FNB/BER index is the measure most closely followed and the most frequently available. The index is also included in the South African Reserve Bank’s leading economic indicator, giving it added importance with economists and market watchers.

The FNB/BER index is constructed using a survey of three questions posed to a sample of South African consumers. First, respondents are asked about their expectations for the overall economy. Their answers, from among five options, are weighted as follows: improve considerably (+10), improve slightly (+5), deteriorate slightly (-5) or deteriorate considerably (-10). Answers to the second question, regarding expectations about the future financial situation of households, are weighted in the same way. Finally, survey participants are asked whether they think it is the right time (+10) or wrong time (-10) to buy durable goods, for example a washing machine. The consumer confidence number reported is the average of the results of the three questions.

How do I use this indicator?
“Confidence measures are normally a leading indicator for what is likely to happen in the real economy,” explains BER senior economist Hugo Pienaar. So the first thing to look for is whether or not the index value is above zero, indicating that consumers are optimistic, or below zero, indicating that consumers are pessimistic. The higher the number, the greater is the level of consumer confidence and vice versa.

The second thing to look for is movement. Did the number rise or fall from the last report? If the number increases from one quarter to the next, consumer confidence is rising. If the number decreases, consumer confidence is falling. Movement either way can have broad economic consequences. “If consumer confidence declines, it may suggest that consumers will spend less money in the economy,” says Pienaar. “Less consumer spending, if sustained, could have an adverse impact on business profitability, which may translate into less employment growth, etc.”

When confidence is high and/or rising, consumers tend to reduce their savings and increase their spending, particularly on luxury and discretionary items like cars, furniture, clothes, shoes, etc. Some of the big-ticket items, for example cars, tend to be financed on credit. So an increase in financing activity for financial institutions and debt levels for households is possible as well. As Pienaar sums up, “High consumer confidence levels normally go hand in hand with (amongst other factors) robust economic growth, job gains and strong real income growth.”

When confidence is low and/or falling, people are worried. They may be concerned about losing their jobs or receiving a meagre pay rise. Regardless of the cause, households tend to cut back on all but basic spending – on food, for example – and increase their savings for the rainy days they think are coming. “When your confidence is low,” Pienaar explains, “you may hold off from purchasing big ticket items such as a vehicle or furniture and rather save more of your income earned.”

Both the index value and the change from the previous quarter are widely reported in the press. If you want to dig a little deeper than the headline numbers, check out the press release issued by the BER. Survey results are available by question, by racial group, by province and a number of other breakdowns. Looking at one or more of these can provide additional insight into consumers’ mindsets. For example, people may be somewhat optimistic about the economy but remain unconvinced that now is the right time to buy a durable good, like a car.

As a final note, a lot of variables affect consumer confidence, so index values can jump around. The key to interpreting these figures is to look for trends over time.

When and where do I find this indicator?
The Bureau for Economic Research posts a press release on their website ( when new quarterly information is available. The number is also widely reported and interpreted in the financial press.

The release of the MasterCard data rates a mention in many of South Africa’s newspapers as well. A full discussion of the results is also available on the company’s data website (


  • Matt spends part of his weekends writing a weekly preview of the global economy for the Mail & Guardian and a detailed preview of Brazil, Russia, India, China and South Africa's outlook for The BRICS Post. During the week, he is a senior economist and head of sales for NKC Independent Economists. He also manages Exchange Data International's and Softek Computer Services' businesses in South Africa. Born and raised in the USA, he worked for the U.S. Treasury Department and Federal Reserve Bank of Boston before moving to Cape Town with his wife, Maya, and Jack Russell terrier, Hazel. They’ve since been joined by two sons, Sebastian and Gabriel, both born in the Mother City. Follow Matt on Twitter: @MattQuigley.


Matt Quigley

Matt spends part of his weekends writing a weekly preview of the global economy for the Mail & Guardian and a detailed preview of Brazil, Russia, India, China and South Africa's outlook for The BRICS...

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