Looking for the Bright Side: Tracking Middle-Class Consumers in 2024

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JEREMY MAGGS: As we approach the festive period, middle-class consumers are grappling with a challenging array of issues. We have rising living expenses, mounting debt worries, and considerable economic uncertainty. Recent inflation figures have also just been released, raising concerns.

Read: Inflation inches up, leaving rate cut hopes intact

However, it’s not all negative, and I’m pleased to share that recent insights from Brand Mapp are shedding light on how we are coping with these pressures. I’d like to welcome back Brandon de Kock, the director of storytelling at BrandMapp. It’s always great to chat with you, Brandon. Your recent findings challenge the prevailing idea that consumers are overwhelmed by debt. What have you discovered?

BRANDON DE KOCK: Hi Jeremy, thanks for having me again. We often see that people tend to generalize the situation. That’s essentially the core message we’re trying to convey. There’s undoubtedly a significant number of consumers experiencing real difficulties, particularly stress. While any income increases aren’t keeping pace with the surging costs of food and energy,

it’s misleading to categorize all 13 million individuals in what we term the middle market—those in tax-paying households—as uniformly struggling with debt.

Our society is quite stratified, and at least half of those in the middle market aren’t feeling the financial pressure as acutely as others. This indicates a somewhat uplifting narrative for that segment of the population, if you understand my point.

JEREMY MAGGS: I suppose it also depends on how one defines feeling the pressure. Your thresholds of ‘pinch’ might differ from mine.

BRANDON DE KOCK: Exactly, and that’s where the debt discussion comes into play. Over the last few years, we have consistently asked consumers how they feel about their debt situation. Annually, we find that fewer than 30% of households are actually stressed about debt.

This means while that 30% faces real debt stress, the remainder either possesses the sophistication to manage debt wisely or leverage it for a different lifestyle among those at higher income levels.

In essence, the key indicator is whether individuals are borrowing to enhance their lifestyle, and the answer is generally no.

JEREMY MAGGS: But would you say that middle-aged individuals might be feeling this burden more prominently than both younger and older adults?

BRANDON DE KOCK: [Chuckle] Yes, both you and I fit in that category. The data shows that those least stressed about debt are younger and older demographics. This is logical. Younger individuals entering the market may not have needed to engage with debt yet, whereas those starting families may find borrowing essential for necessities like housing and childcare. The use of personal loans or credit cards becomes much more important for family-oriented generations.

Interestingly, baby boomers tend to be the least indebted. They may have either completely paid off their debts or adapted to a different living style post-retirement.

The situation significantly affects those entering mid-life stages; it’s a substantial issue in today’s economy.

JEREMY MAGGS: Maybe that’s why baby boomers seem less concerned, Brandon.

BRANDON DE KOCK: [Chuckle] They might just be spending their money elsewhere.

JEREMY MAGGS: It’s intriguing to note that escalating food and energy prices are keeping nearly half of South Africans awake at night. However, there’s some light at the end of the tunnel. The recent inflation figures have climbed to 2.9% in November, slightly up from 2.8% the month before, yet food prices crucial to household budgets have continued to decline.

Notable reductions in prices have been observed. For instance, eggs are down 3.7%, and eight out of eleven categories including vegetables, cheese, bread, and cereals have also recorded price drops. So perhaps there’s a hint of festive cheer.

BRANDON DE KOCK: Indeed, just a glimmer of hope. The fact that eggs are more affordable is a positive sign. However, it’s essential to recognize that we still exist in a highly volatile environment. The uncertainty surrounding what might improve or worsen remains prevalent. Taking the year as a whole, it has been one of the most challenging for consumers in recent times.

With water shortages in Johannesburg, ongoing Eskom issues, and a stressful election cycle, consumers have felt quite overwhelmed this year. As we close the year, it’s hard to tell how you’re feeling, but there seem to be positive shifts with the GNU possibly doing something right, as inflation appears to be lower than before. Consumer confidence indicators are trending upwards, suggesting some renewed optimism about the future.

This past year, people have kept substantial amounts of money in their pockets. It’s not that there wasn’t money; it’s more about spending wisely.

JEREMY MAGGS: Brandon, it’s gracious of you to include me in your observations about not sleeping at night. At our age, the waking moments become part of living.

BRANDON DE KOCK: [Chuckle]

JEREMY MAGGS: Yet, I find your data regarding consumer spending habits intriguing, particularly the postponement of discretionary spending.

BRANDON DE KOCK: We still have a bit of analysis to conduct on that front, but let me share an interesting trend. Have you tracked new passenger car sales lately? I can’t recall if we’ve discussed this before.

JEREMY MAGGS: Yes, we cover that monthly on this program.

BRANDON DE KOCK: You would have noticed the striking trend. Observing new passenger car sales offers valuable insights into consumer confidence. If you examine the sales graph for 2024, it’s unprecedented. It marks the first recorded instance where April sales fell below those of March—indicating a significant market decline.

Yet, the past two months have witnessed the highest passenger car sales in eight years, raising questions about this fluctuation. One theory is that a few individuals took advantage of the two-pot system, viewing it as the ideal moment to invest their retirement funds into new cars. Additionally, lower interest rates and a reduced repo rate likely played a role.

When analyzing these new passenger car sales data, it reflects a year of significant volatility. It’s an indication that consumers still had the financial capacity because car purchase prices haven’t decreased. I attribute this to a postponement in spending.

For retailers heading into the Christmas season, I sincerely hope my assessment is accurate; it’s been a tough year for retail in South Africa, and there may be pent-up demand for retail therapy awaiting expression.

JEREMY MAGGS: Finally, I’ll be mindful of the clock as time is always of the essence. Can you clarify what you mean by the “subscription generation”?

BRANDON DE KOCK: Oh, this is an intriguing concept. I wish I had concrete data to share. This theory is something we are actively working to validate, with more exploration planned going forward. There’s a hint in the data suggesting a change in consumer behavior, particularly among younger generations, who have grown accustomed to not making large purchases.

As younger consumers consider costs like fuel and insurance that come with owning a vehicle, alternatives like Uber become appealing. The subscription generation—primarily Gen Z and some Gen X—tends to favor a lifestyle built around subscriptions rather than ownership.

This shift indicates that renting could be more aligned with modern living than traditional home buying. It’s a trend that could influence the market in significant ways going forward.

Does that resonate with you?

JEREMY MAGGS: It makes perfect sense. Since this will be our final discussion this year, Brandon de Kock, director of storytelling at BrandMapp, I eagerly await your insights in the new year. Thank you for your time.

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