Even with that rebound, FNB expects confidence to stay muted as household budgets get squeezed by higher oil and interest rates tied to the Iran war. In recent days Brent crude has moved from about $90 to above $100 per barrel, and the Johannesburg-based lender says costlier oil has already pushed up pump prices/) for gasoline and diesel, with a further 2 rand per liter rise projected for October. That leaves less breathing room after essentials.
Rates are part of the pressure. Mamello Matikinca-Ngwenya, FNB's chief economist, pointed out that May's 25 basis point hike took the policy rate to 7%. She said the increase bites harder for middle and higher earners, who tend to have greater exposure to formal sector credit and devote more to big-ticket durables.
There is a split lower down the income ladder too. "Although higher bus and taxi fares have also increased the transport costs of less-affluent consumers, low food inflation has shielded the budgets of low-income households," Matikinca-Ngwenya said.
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FNB also noted that, even though this group carries the most spending clout, high-income confidence is still deeply depressed, and renewed as well as intensifying hostilities in the Middle East are adding another weight on sentiment. As the bank put it, "concomitant sharp increase in oil prices in recent days, the near-term outlook for fuel prices - and hence also overall inflation and interest rates - has soured."
FNB's read on the coming months: "Shoppers will likely remain cost-conscious and prioritize necessities over discretionary spending in the run-up to the festive season, suggesting that consumer spending growth will remain muted and that value-for-money retailers may outperform higher-end brands," Matikinca-Ngwenya said. The central bank's next policy rate decision is set for Sept. 23. If households keep trimming non-essentials, it is the budget chains and basics that could see steadier foot traffic.
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