The receding threat of an interest rate hike and declining fuel prices are behind the rise in the index in the fourth quarter of last year.

It indicates that, despite warnings from Reserve Bank governor Tito Mboweni last year that people should start tightening their belts, consumers look set to carry on spending strongly well into the new year. This will be good for economic growth, which has benefited immensely from increases in consumer spending of about 6% a year.

The index, compiled by First National Bank (FNB) and the Bureau for Economic Research at Stellenbosch University, rose to 20 in the fourth quarter, from 17 in the previous quarter. The only other time it reached this level was amid the euphoria of SA being awarded the 2010 Soccer World Cup in the second quarter of 2004.

The index is compiled from the results of a survey in which consumers are asked for their outlook for the economy and their own finances in the next year, as well as whether they view the present time as suitable to buy durable goods.

FNB chief economist Cees Bruggemans (pictured) said yesterday that, with a strengthening rand and suppressed inflation making an interest rate cut this year more likely than a hike, “consumer confidence has every potential to rise to even higher levels” this year.

“The economy is on a roll and is expected to continue, helped by a growing multitude of South African consumers.

“Also, more people seem to be confident about their own prospects, as income, employment and asset market prices keep rising.”

Bruggemans said gains in the index were held back by many consumers’ assessment of the present as being unsuitable to purchase durable goods.

He said reservations could have been raised because, at the time of the survey, the extent to which the risk of an interest rate hike had diminished was unclear.