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Aug 07, 2014

Business confidence at 15-year low in July

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Africa|Africa|South Africa|Building|Manufacturing|Manufacturing Output|Precious Metal Prices
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After picking up marginally in June to 89.7 from 88.9 in May, the South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) declined to 87.9 in July – its lowest level since the 86.9 recorded in September 1999.

On a month-on-month basis, five of the thirteen BCI subindices, including manufacturing output, import volumes and building activity made a negative contribution to the index, compared with eight in June.

The level of business confidence was now 2.8 index points lower than that of a year ago as the negative yearly changes in the BCI subindices gained momentum.

Ten of the thirteen BCI subindices made a negative year-on-year contribution to the index in July, while international developments were responsible for the positive contributions made by share and precious metal prices in the context of a staid domestic economic atmosphere.

Despite low business confidence, Sacci said it welcomed the balance being tilted towards a more positive outlook for the world economy for the rest of the year.

“An improved European recovery and affirmation of South Africa’s African Growth and Opportunity Act status could positively influence trade to and from South Africa,” it stated.

The chamber was, meanwhile, concerned about the employment outlook and the impact that declining employment would have on income inequality and possible increases in the Gini-coefficient.

This was expected to further negatively affect the real disposable income of households and their expenditure potential, which was already under pressure.

“Rising unemployment is one of the immediate consequences of high wage demands supported through strike activity. The secondary economic consequences will surface more starkly in the medium term.

“With the consumer playing a diminishing role in the domestic economy, related measures of business confidence will likely be drawn lower,” it cautioned.

Edited by: Chanel de Bruyn
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