Quantec's Consumer Vulnerability Index (CVI) has showed a steady pattern in the first quarter of 2012. The improvement of consumer vulnerability which commenced in 2009, therefore appears to have plateaued. After reaching dangerously high levels during 2008, the index had, by the end of 2010, dropped by nearly 29 index points (or roughly -37%). During the past eighteen months, the index has been fluctuating in a narrow range around the 50-point mark, recording 51 over the two most recent periods.
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' savings efforts also showed some improvement, although they still found themselves in a position of dissaving.
Employment growth also picked up slightly, but only half of job losses that occurred during the recession had been restored by the end of the first quarter of 2012. The lack of improvement in residential property values meant that households' net worth remained under pressure. Credit uptake in real terms by households did appear to be picking up by the end of 2010, but has stalled again during 2011, showing only a marginal increase thus far in 2012.
The economy's performance and the extent to which employment growth will continue in 2012/2013, will be very important determinants of households' ability to meet their debt obligations and further improve their financial vulnerability.