South African consumers are facing sustained financial pressure due to elevated fuel and food prices and power cuts, according to the latest Momentum-UNISA Consumer Financial Vulnerability Index (CFVI).

The first quarter’s index reported a slight improvement to 49.1 in Q1 2023 from 47.0 in the final quarter of 2022. Momentum stated that this is still in the range it characterises as ‘very exposed’.

Despite a slight improvement from the previous quarter, the current index is significantly lower than the 53.4 recorded in the first quarter of 2022.

The index is based on a survey of various consumer-facing businesses, including banks, insurers, retailers and other credit industry institutions.

Momentum said that the index provides a window into the psyche of consumers and the extent to which they feel vulnerable about their income, expenditure, savings and debt servicing capabilities.

The table below illustrates the CFVI changes over the past periods:

According to the financial services firm, consumers improved their saving behaviour to some extent, although more so in saving for retirement than for emergencies.

Regarding expenditure, consumers are being forced to buy less to more affordable levels in light of higher prices, particularly for food and fuel.

In some positive outcomes, expenditure was reportedly better aligned to income, with consumers feeling more comfortable about their income being sufficient to afford their expenditure.

Momentum said that the largest improvement in the survey related to debt servicing vulnerability, with consumers sacrificing some purchases to be in a better position to service their debt.

Risk factors

In the first quarter of this year, load shedding and high food and fuel prices were the main high-risk factors affecting consumers’ financial vulnerability.

“This was followed by unemployment, political instability and corruption and weak municipal service delivery,” said the company.

With the top three risk factors all pointing to higher prices, affordability is a major concern, with load shedding also resulting in consumers having to resort to energy alternatives affecting purchases and their ability to save and repay debt.

A handful of previous risk factors are expected to continue into the second quarter of this year; however, there have been some substantial changes.

“Consumer key informants expect high fuel prices and political instability and corruption to become higher risks than increasing food prices to consumer finances in Q2 2023,” Momentum said.

It is, however, important to note that the CFVI survey was done before 50 basis points increased the repo rate in March.

The graph below lists the expected risks to consumer finances for the second quarter:

---

Read: These taxpayers are being targetted by criminals in South Africa