Consumers were cautious with finances in the third quarter of 2023

Consumers were more cautious and did less impulsive buying in the third quarter of 2023. Picture: Independent Newspapers

Consumers were more cautious and did less impulsive buying in the third quarter of 2023. Picture: Independent Newspapers

Published Oct 31, 2023


Consumers were more cautious and did less impulsive buying in the third quarter of 2023, although being a bit less financially vulnerable, the majority still despaired about their financial situation.

This information is contained in the latest Consumer Financial Vulnerability Index (CFVI) by Momentum and Unisa for the third quarter of 2023.

According to the report, consequently, consumers were constantly attempting plans to solve their problems. This, however, consumed most of their available mental bandwidth, negatively affecting other parts of their life, such as productivity and their relationships with family and friends.

“Mental bandwidth refers to the cognitive capacity or mental resources a person has available for processing information, making decisions, and engaging in various mental tasks.

“This cognitive processing power is limited and can become overloaded or drained, affecting your ability to focus, make good decisions, and perform tasks effectively,” it said.

Nevertheless, an increase in “feel-good” purchases occurred in Q3 2023, possibly driven by consumers whose income improved sufficiently to afford such purchases, the report noted.

The report stated that 73.7% of consumers were constantly thinking about their finances; 56.9% of consumers were more cautious and did less impulsive buying; while 62.9% of consumers bought things to make them feel good even though they didn’t really need them or have money to do so.

The report said that political instability and corruption, as well as the well-known triad of unemployment, poverty, and inequality, in addition to load shedding, were key risks to building on the improvement in the state of consumer finances.

The index 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 (consumer price index), the interest rate, and income earning developments.

“The descending order of risk posed by high food and fuel prices and rising interest rates accrued from a somewhat better economic environment in Q3 2023.

“Whereas food price inflation averaged 12.5% in Q2 2023 compared to a year ago, it declined to around 9% in Q3 2023. Similarly, although the petrol price was on average 1.1% higher in Q3 2023 compared to Q2 2023, it was 7.6% lower compared to a year ago,” the report said.

While the repo rate was raised by 25 basis points in Q2 2023, it remained unchanged in Q3 2023, some 200 basis points higher compared to Q3 2022.

Looking ahead, the CFVI showed that there was a mixed economic and personal finance outlook for Q4 2023.

“Consumer key informants are still overwhelmingly negative, but their outlook for CPI and consumer finances improved compared to Q3 2023, while they were most negative on the global economic outlook. The following were the majority views for Q4 2023.

“Persistent unemployment, poverty, and inequality and continuous load shedding are expected to be the highest risks to consumer finances in the fourth quarter of 2023,” it said.