The report containing the results of the Momentum-Unisa Consumer Financial Vulnerability Index for the second quarter of 2022 has been released. The results indicated that consumers were more financially vulnerable during the quarter. The Momentum-Unisa Consumer Financial Vulnerability Index (CFVI) weakened from 53.4 points in Q1 2022 to 48.5 points in Q2 2022, dipping back into a very exposed state.

Analysis of the insights on the four subindices of the CFVI revealed the main reason for the deterioration in consumers’ financial vulnerability between Q1 2022 and Q2 2022. They attributed it to a decrease in the resources and/or assistance consumers could access to cope with rising prices and interest rates.

Reasons behind the changes in the four sub-index scores:

• Higher income vulnerability can be ascribed to less consumers being able to complement their income with other resources such as transfers from family and friends as they also experienced more financial pressure.
• Savings vulnerability levels increased mainly because of a strong decline in the savings consumers had available for emergencies.
• In terms of expenditure, consumers were more expenditure vulnerable as their expenditure increasingly exceeded their income.
• Consumers’ ability to service debt worsened to the extent they had to seek outside assistance to cope with their debt burdens.

Economic and consumer finance outlook

The outlook for Q3 2022 seems to be bleak. With regards to the expectations for the economic environment and consumer finances, the following majority views for Q3 2022 were expressed:

• The overwhelming majority expect consumer price inflation to increase rapidly.
• Unemployment is expected to increase.
• The South African and global economies are expected to perform worse by close to two-thirds of the key informants.
• Some 69.1% anticipate the state of consumer finances to deteriorate, while 45.7% expect consumers to feel even less in control of their finances.
• Some 96.8% of key informants are of the opinion it will take more than another year for consumer finances to recover from the impact of COVID-19 and the lockdown.

Several risk factors to consumer finances were also identified. Steep increases in municipal tariffs will pose a further risk to consumer finances in Q3 2022 in addition to current risks such as higher interest rates, fuel- and food prices and loadshedding.

Such risks are supported by the fact that significant increases have been recorded in for example fuel and food prices compared to a year ago as recorded at the end of Q2 2022. Examples of the steep increases include:High levels of consumer financial vulnerability in the short- to medium-term will in all likelihood persist, given an increasing number of structural imbalances, downside risks, political and social instabilities, increasing poverty and inequality, as well as governance and government administration deficiencies. This will negatively impact the economy, employment and household incomes, which will filter through to adversely affect all aspects of consumer finances.

Please click HERE to download the full report.