Quantec's Consumer Vulnerability Index (CVI) for South Africa has improved in the third quarter of 2012 after having remained at the same level for seven consecutive quarters. This was the longest period of sideways movement in the index observed to date. The improvement of consumer vulnerability which commenced in 2009, has now gained some further momentum, which was caused mainly by the increase in household financial assets relative to their debt exposures. All of the other subcomponent variables showed little change in the past quarter.
After reaching dangerously high levels during 2008, the index had, by the end of 2010, dropped by nearly 29 index points (or roughly -37%). Since then, the index has remained flat at the 51-point mark, receding to just below 50 during the most recent quarter.
Households' vulnerability improved over the past three years mostly in the areas of indebtedness. Lower interest rates ensured that debt servicing costs declined significantly, while households have made some strides in improving their dissaving behaviour.
Employment growth also picked up slightly, but only around half of the job losses that occurred during the recession, had been restored by the end of the third quarter of 2012. The lack of improvement in residential property values meant that households' net worth remained under pressure, while lacklustre employment growth negatively affected household disposable income growth.
Credit uptake by households did appear to be picking up in real terms since the middle of 2012, but remained well below the median growth rate recorded since 1981. The economy's performance and the extent to which employment growth will continue in 2013, will be crucial factors in determining households' ability to meet their debt obligations and further lessen their financial vulnerability.