After remaining unchanged at 36 points in the first quarter, the Rand Merchant Bank (RMB)/ Bureau for Economic Research Business Confidence Index (BCI) fell to 32 points in the second quarter – the index’s lowest level since the fourth quarter of 2009.

The BCI was 11 points lower year-on-year, with about two-thirds of respondents stating that business conditions were unsatisfactory in the second quarter.

Confidence fell sharply among retailers, with sentiment also deteriorating, although not as much, in the building and wholesale trade sectors.

The mood improved somewhat among manufacturers and new-vehicle dealers, but from very low levels.

Retail confidence fell sharply by 18 points to 26 in the second quarter. While growth in sales volumes remained weak, many retailers could not sustainably increase their selling prices to the same extent as in the first quarter.

Wholesale confidence held up well, declining by only three points to 47.

As wholesalers did not have to scale back selling price increases as much as some retailers, growth in turnover only moderated slightly, despite continued weak sales volumes.

After climbing to 43 in the first quarter, from 39 index points in the fourth quarter of last year, confidence among building contractors fell back to 38.

The improvement in residential building activity was encouraging, but, unfortunately, nonresidential building activity contracted at an accelerated pace in the second quarter.

In the case of new-vehicle dealers, the BCI rose by only one point to a still depressed 25, as sales volumes continued to decline.

Similarly, while the index for manufacturers increased by five points, to 23, the level remained in deep net negative terrain.

It would appear that the operating environment for most manufacturers continued to be characterised by poor domestic sales volumes, rising inventories of finished goods and an apparent lack in ability to raise domestic and export selling prices.

Looking at the broader economy, RMB expected South Africa’s gross domestic product to have contracted in the second quarter and that the economy would likely show a poor performance for the full year.

“Still, it is not unreasonable to expect the downswing to trough in the second half of 2016”, said RMB chief economist Ettienne le Roux.

He noted that, as higher inflation affected consumer spending this year, lower inflation should bring about some relief in 2017.