Business confidence remains at low levels in Q4

19th November 2013

By: Creamer Media Reporter

  

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After falling by four index points in the second quarter and by a further six points in the third quarter of the year, the Rand Merchant Bank (RMB)/Bureau for Economic Research (BER) Business Confidence Index (BCI) “essentially flat-lined” in the final months of the year, the organisations said on Tuesday.

The RMB/BER BCI increased by only one point to 43 in the fourth quarter.

"While business confidence stabilising in the low 40s is hardly good news, it is entirely consistent with the economic upswing continuing, even if, at stages, it has been of a stop-go and generally modest nature," commented RMB chief economist Ettienne le Roux.

At 50 months, the current cyclical upturn is already the second longest in South Africa’s post-war history, he added.

The fourth-quarter BCI recorded falling confidence among retailers, but rising confidence among wholesalers and building contractors. In the case of manufacturers and new vehicle dealers, confidence remained relatively flat.

Retail confidence saw a nine index point drop to 40, its lowest level since the second quarter of 2012. While this was, on the face of it, worrisome, RMB/BER stated that the underlying picture was somewhat more upbeat, as growth in sales volumes actually accelerated in the fourth quarter.

“While this partly reflects the usual pickup in retail trade in the run-up to the festive season, recent high wage settlements, ongoing (albeit modest) growth in credit, and declining inflation (in part due to recent petrol price cuts) point to there still being some life left in the consumer.

“Besides, discrepancies between sales volumes and confidence have occurred before, only for confidence to improve again,” the organisations noted.

Similarly, the one index point decline in manufacturing confidence to 36 in the fourth quarter “failed to do justice” to production, as well as domestic and export sales volumes, which improved notably in the fourth quarter.

Boosting production, in particular, were manufacturers of transport equipment, which made up lost ground after the labour strikes in the third quarter.

“Also, the weaker rand apparently gave domestic and export sales a decent lift. That confidence stayed low, nonetheless, implies that the majority of manufacturers remain suspicious of the durability of the rebound in activity.”

Further, although confidence among new vehicle dealers was little changed – rising by only two index points – only four out of every ten respondents were happy about prevailing business conditions.

“This is unsurprising, given weakening sales volumes, as well as seasonal factors, where business quiets down towards year-end and then picks up again as some customers prefer to delay purchasing a new car until the first quarter,” RMB and BER stated.

As for the remaining two sectors that showed an improvement in sentiment, wholesaler confidence rose by eight index points to 51, while confidence among building contractors increased further, rising by four to 47 – a near six-year high.

A faster rate of recovery in nonresidential, as well as a continued modest upturn in residential building activity lifted overall building confidence.

Meanwhile, wholesalers of both consumer and nonconsumer goods saw an improvement in sentiment, partially reversing what was a large decline in wholesaler confidence during the third quarter.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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