Consumer Financial Vulnerability Index: Q3 2023

Structural factors to keep consumer finances fragile
Cyclical factors kept consumer finances in a fragile state, with structural factors becoming main risks to consumer finances in the third quarter of 2023 (Q3 2023). Key consumer informants identified structural impediments such as a) political instability and corruption; b) the well-known triad of unemployment, poverty, and inequality; in addition to c) loadshedding as key risks to building on the improvement in the state of consumer finances which occurred in the third quarter of 2023 (Q3 2023). The CFVI increased to 50.9 points in Q3 2023 from 49.3 points in Q2 2023, mainly due to a more upbeat cyclical economic environment, driven by encouraging CPI, interest rate and income earning developments.
The CFVI as measured from the views of consumer key informants who deal with consumers daily increased to 50.9 points in Q3 2023 from 49.3 points in Q2 2023 and 49.7 points a year ago. This deemed consumers to be less financially vulnerable in Q3 2023, although still in despair.
The improvement occurred in all four subcomponents of the CFVI. An improvement in the income index to 52.0 points from 49.9 points in Q2 2023 is indicated, while the expenditure vulnerability index rose slightly to 52.9 points from 52.3 points. Although the saving and debt servicing indices also improved, they were still below 50 points. The improvement in the CFVI and its four sub-indices was driven by an increase in consumers’ access to an income via both employment and transfers from family and friends. This had a positive domino-effect on the other three subcomponents. Although consumers still limited their purchases, the better income combined with lower CPI contributed to an improvement in the expenditure index as they were better able to afford their expenses. Likewise, combined with stable interest rates, the higher income improved consumers’ ability to service their debt, though they were still vulnerable in this department. Similarly, the improved access to more income, combined with being better able to afford expenses and debt service costs, created room for emergencies saving. However, consumers were not yet in a position to contribute more to retirement savings, causing the saving index to remain below 50 points.
Consumers in general were more cautious and did less impulsive buying in Q3 2023 compared to both Q2 2023 and Q3 2022. Even so, and although being a bit less financially vulnerable in Q3 2023, the majority still despaired about their financial situation. Consequently, they were constantly attempting plans to solve their problems. Nevertheless, an increase in “feel-good” purchases occurred in Q3 2023, possibly driven by consumers whose income improved sufficiently to afford such purchases.
Cyclical factors such as high food and fuel prices and rising interest rates – and a structural factor in the form of loadshedding – presented themselves as highest risks to consumer finances in the past year. Although the cyclical factors continue to be high risks to consumer finances, two structural risks – loadshedding and political instability and corruption – increased in importance compared to high food and fuel prices in Q3 2023.
A mixed economic and personal finance outlook for Q4 2023 was revealed. When the effect of cyclical factors on consumer finances subsides, structural factors normally re-emerge as the biggest risks. This is confirmed by the risks expected to exercise the biggest pressure on consumer finances in Q4 2023. Persistent unemployment, poverty, and inequality and continuous loadshedding are expected to be the highest risks to consumer finances in Q4 2023. Although another structural risk, political instability, and corruption, moved down to the fourth highest risk, this should be viewed in context. It is a relative issue – its risk measurement was at the exact same level as in Q2 2023, but other factors are expected to become even higher risks in Q4 2023.
As part of Momentum's Science of Success campaign, the CFVI is produced in partnership with the Bureau of Market Research of Unisa. It aims to provide South Africans with information and strategies on how they can accelerate their journey to financial success. The CFVI is compiled quarterly from the views of key informants (researchers, bankers, insurers, retailers, government, economists, analysts, etc.) who deal with consumers daily and/or study consumer finances on a continuous basis. The results of this release of the CFVI for Q3 2023 stem from research conducted by the Bureau of Market Research via online and CATI-based surveys done during September 2023.
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