Consumer spending under pressure

A significant 35% of households expect their expenditure on large purchases, such as cars and appliances, to “decrease a lot” over the next three months, according to the latest TransUnion quarterly survey on the current and future impact of COVID-19 on household budgets, spending and debt.

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A further 16% of households expect their expenditure on cars and appliances to “decrease a little” over the next three months while 18% expect their household purchases on these items to “remain the same”, 9% for it to “increase a little” and 4% for it to “increase a lot”.

TransUnion says the study measures changing consumer attitudes and behaviour based on the dynamics of income, debt and identity theft, with the analyses and insights informing decision-making to empower consumers and help businesses create economic opportunity for consumers.

The survey report for the third quarter of 2021 says the financial impact of COVID-19 and concern regarding the ability to pay loans remains high.

It says that during the middle of August 2021, a month after South Africa was gripped by civil unrest, looting and the third wave of the Covid-19 pandemic, 61% of respondents indicated their household income was currently negatively impacted as a result of the crisis.

“Consumers remain concerned about their ability to pay their bills and loans. Forty-one percent reported they’ve been in arrears for a bill or loan in the past three months, indicating a substantial proportion of South Africans remain under financial pressure. Of consumers who missed payments in the last three months, 33% reported missing one and two bills or loans, and 17% missed three bills or loans.

"Furthermore, 79% of consumers are very or extremely concerned about the current inflation rate, and 83% are making changes to their purchasing behaviour because of inflation,” it says.

The survey revealed that the percentage of respondents who were unable to repay a vehicle loan had deteriorated by six percentage points to 25% compared to the second quarter of 2021 while the percentage who were unable to pay an auto lease deteriorated by five percentage points 20% and those who were unable to pay their vehicle insurance also deteriorated by five percentage points to 13%.

The highest categories of credit that households were unable to pay were Mashonia loans, which are small loans provided by credit providers or loan sharks (47%), followed by private student loans (41%), personal loans (38%), account with retail/clothing store (35%), medical bills (28%) credit card (27%), rent (26%), utilities (21%) and home loan (21%).

The survey also revealed that auto leases at 17% and auto loans at 13% were the top two categories of types of bills or loans that had been enrolled in financial accommodation in the past year

There was a 10 percentage point deterioration in auto leases that had been enrolled in financial accommodation in the past year but auto loans remained at the same level and there was a one percentage point deterioration in vehicle insurance in this category to 6%.

TransUnion says 41% of all consumers surveyed reported they have been in arrears for a bill or loan in the past three months, indicating just under half of consumers are still struggling to make payments.

It says only 3% of respondents indicated their household finances have fully recovered since being impacted by the pandemic while 50% says they have not recovered.

“Previous higher levels of optimism have decreased, likely as a result of the unrest and riots which took place in July. A lower 69% of South Africans remain optimistic - down six percentage points from June and seven percentage points from March. The proportion of consumers who are confident their household finances will fully recover in the next 12 months dropped from 52% in June to 47% in Aug,” it says.

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