WALLETS STAY IN POCKETS

Date: 31 Jul 2021

CONSUMER SPENDING: 5% DECLINE FOR MONTH

Massive dips slightly alleviated by panic buying.

Recent transactional data shows how consumer spending took a hard knock from the Covid third wave and stricter lockdown, as well as the unrest from the rioting and looting that occurred this month. These two events have dented the country’s economic recovery in a short time.

BankservAfrica’s card and point-of-sale (POS) transactional data measured consumer spending from the lockdown levels during the June to July period, as well as [during] the riots in KwaZulu-Natal and Gauteng in July. It also compared the spend over this period against the 2020 and 2019 figures.

“The massive dips observed in our consumer spending data in July 2021 are worrying, especially when compared against the previous months, where the economy was making good headway against the 2020 slowdown,” says Shergeran Naidoo, head of stakeholder engagements: BankservAfrica.

Transactions during the week of looting

During the main week of looting, from 11 July, the volume of card and ATM cash withdrawals declined from about 4.5 million transactions per day to about 4.3 million. This was, however, slightly alleviated by panic buying in the two affected provinces.

Due to the South African Social Security Agency grant payment dates (which are factored in the transactional data) and the looting, which started in earnest on 9 July, the average number of transactions equalled 3.35 million for the 15 days to 24 July, compared to the 3.69 million transactions for the same 15 days to 24 June.

The impact was a 9% drop on the comparable 15 days in July 2021. This indicates the riots and looting had at least a two-week impact on consumer spending on POS and ATM transactions.

Transactions during the May/ June lockdown levels

From 31 May, when level 2 lockdown was introduced due to the sharp rise in Covid infections, the number of transactions dropped.

Transactions declined further when level 3 was declared on 15 June and even further when level 4 was announced on 27 June.

It appears South Africans were taking a cautionary approach during the third wave.

Spend was also affected by restrictions, such as the prohibition of alcohol sales, and restaurants being unable to operate.

In the days following former president Jacob Zuma’s imprisonment, when disruptions began and led to the looting, spending remained about 5% below the same period two years ago. There is a slow recovery now.

The consumer spending impact from the level 4 lockdown and the riots is substantial, and one can expect this to show a negative impact on June and particularly July economic data.

The estimated 9% transaction decline over 15 days could be equal to about a 5% decline for July for consumption expenditure.

The massive dips in July are worrying

The change in consumer spending on card and cash since 2019

The 2019 pre-pandemic figures have been used as a base to illustrate the impact on normal year transactions.

South African consumers have spent about 5.2% less since the adjusted alert levels 3 and 4 came into force in June 2021, compared to 2019.

The most recent change was -2.6%.

By Mike Schüssler

 

 

 

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