Domestic animal spirits are depressed. This is one reason the South African economy is flirting with recession. Two weeks ago we learnt that business confidence for the second quarter of 2016 fell to its lowest level since the 2008-2009 global financial crisis and recession.This week we learnt that consumer confidence also fell deeper into negative territory in the second quarter.Consumer confidence has now been in negative territory for most of the past four years.Consumers are most concerned about economic prospects. As a consequence, they assess the present as a bad time to make big financial commitments such as the purchase of durable goods like cars and furniture.story_article_left1This is reflected in the deep contraction in overall spending on durable goods that has persisted for more than a year, and also in vehicle sales, which have contracted for 14 of the past 15 months.A myriad adverse economic forces had already been hammering the economy since 2015, including political uncertainty, social unrest, a stagnation in public sector job numbers, a dramatic depreciation in the rand, soaring food prices and rising interest rates.These headwinds were exacerbated by the impact of the drought on the farm sector and the effect of weak global demand and subdued commodity prices on the mining sector, culminating in a 1.2% contraction in South Africa's real gross domestic product in the first quarter of 2016.In addition, employment numbers show that the domestic economy shed jobs between the fourth quarter of last year and the first quarter of this year, causing the unemployment rate to rise to 26.7% - the highest rate recorded since Statistics South Africa started with the Labour Force Survey in the first quarter of 2008.However, despite deeply negative sentiment about the economic outlook, inviting defensiveness, households' assessments of personal finances are relatively more upbeat.The caveat to this is that it is high- income households that are more upbeat about personal finances. Lower-income households are very unhappy about the economy and their personal financial prospects.As a consequence, a breakdown of the survey results according to household income group reveals diverging results. The consumer confidence levels of high-income consumers improved, but low-income confidence levels plunged in the second quarter of 2016.block_quotes_start Given that inflation is set to accelerate further ... the purchasing power of most households will likely wane further in coming months block_quotes_endThe rise in South Africa's jobless rate and rapidly rising food inflation - and more recently fuel prices - are now exacerbating the impact of pervasive income inequality on low-income households.According to Stats SA, food inflation surged from 5.2% year on year in the fourth quarter of last year to 11% in April/May 2016, while the petrol price rose nearly R1.50 (13%) between March and June 2016.Low-income households spend proportionally more of their budgets on food and transport costs compared to higher-income households and therefore typically bear the brunt of the impact of higher food and fuel prices.story_article_right2In addition, a disproportionately large share of job losses during the first quarter occurred among traditionally low-skilled or lower- income occupations, compared to job gains among employees in the relatively better-paid professional or management posts.Whereas the weak job market and higher food prices weigh on lower- income consumers, the fact that S&P Global Ratings did not downgrade South Africa, and share markets picked up during the survey period, may have lifted the spirits of the higher-income group.Given that inflation is set to accelerate further on the back of the drought-induced rise in domestic grain prices and sustained weak rand exchange rate, the purchasing power of most households will likely wane further in coming months.With little support expected from policymakers currently tightening on both the monetary and fiscal fronts, growth in real consumer spending is likely to slump to close to 0% in 2016.Nxedlana is FNB's chief economist..