CONSUMER SENTIMENTS
Surging Inflation And Climbing Interest Rates Dampen Consumer Sentiments In August
By Yannick Lefang
• Consumer sentiment in Africa receded by 5 points in August following a modest rebound in the previous month . Both the index of future expectations and index of current economic conditions worsened with the former losing 3 points and the latter falling by 10 points .
• All of the household indices tracked deteriorated this month . After gaining 5 points in July , the discretionary spending index receded by 12 points . This was also the case for general city economic conditions , job prospects and household income indices which dropped by 2 , 7 and 2 points respectively following an increase last month . At the same time , the purchasing power and personal finance indices continued on a downward trend sliding by 4 and 6 points respectively while the general country economic conditions index weakened by a point after stalling in July .
Cameroon , Ghana and Kenya with Kenya recording the largest gain of 8 points thereby moving into positive territory as its index climbed from -2 to 6 . On the contrary , consumer sentiment in Nigeria , South Africa and Tanzania dwindled with South Africa undergoing the biggest decline as its index decreased by 39 points . Meanwhile , consumer confidence in Ivory Coast remained unchanged in August .
Kasi ’ s pan African index of consumer sentiment ( Kasi ICS ) which track seven countries ( Nigeria , South Africa , Ghana , Ivory Coast , Cameroon , Kenya & Tanzania ) shifted into negative territory for the first time since March 2021 as the index slipped by 5 points from 2 to -3 . This move is a reversal from July ’ s expansion of a single point . The downturn in consumer sentiment is associated with a disintegration of both the index of current economic conditions and index of future expectations which crumbled by 10 and 3 points respectively . with the rising inflation which has affected the global economy . In fact , some countries are witnessing levels of inflation that have not been seen since the early 2000s . For example , Nigeria ’ s annual inflation rate for August 2022 hit 20.52 % which is the highest level since September 2005 . Similarly in Ghana , annual inflation climbed to 34 % in August which is a record-high since 2001 .
The surge in prices has affected the cost of production in the continent as illustrated by the producer price index for some countries e . g . Ghana and South Africa . According to the Ghana Statistical Service , the producer price inflation rate for this month rocketed by 46 % on an annual basis primarily due to inflation in the manufacturing of coke , refined petroleum products and nuclear fuel . Ghana ’ s producer price inflation report shows that the inflation rate in the petroleum sub-sector has escalated from 36 % in January 2022 to 170.3 % in August .
• Focusing on the countries tracked by the index , consumer confidence advanced in
African governments continue to grapple
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Despite the challenging environment with rising inflation , increasing interest rates and supply chain issues , businesses in Africa have an opportunity to turn these challenges into opportunities . There are opportunities to reduce reliance on import by sourcing locally , strengthening manufacturing to improve quality and price , and lastly meeting the changing needs of consumers .
Furthermore , given the fact that majority of African countries are net-importers , the rise in global prices has led to a depreciation of local currencies and increased import bills . Data from the Central Bank of Kenya shows that , between January and August this year , the Kenyan shilling has lost 6 % of its value against the US dollar . Consequently , Kenya ’ s import cover , which measures the number of months of imports that can be covered with foreign exchange reserves available with the central bank , has fallen to 4.46 months which is the lowest level in six and a half years . In order to deal with the inflationary pressures and currency volatility , central banks are raising their interest rates significantly . For example , the Bank of Ghana held a special monetary meeting on 17th August where they hiked their benchmark interest rate by 300 basis
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