The North West University (NWU) Business School’s Policy Uncertainty Index (PUI) has come in lower in the third quarter of the year, having declined from 76.2 in the second quarter to 71.8 in the third quarter.

The PUI, nevertheless, “remains well in negative territory for now”, says NWU.

A level beyond 50 in the PUI reflects heightened policy uncertainty, with a decline implying reduced uncertainty.

The PUI is the net outcome of positive and negative factors influencing the calibration of policy uncertainty over the relevant period.

The business school explains that several contrary factors are keeping the PUI elevated, however, there were enough positive factors to bring the PUI slightly lower over the past three months.

Taking the global context into account, there is a continued overall slowdown in the world economy, with world economic growth estimated to be about 3% this year and global commodity prices being lower.

This while new uncertainties have arisen in the Chinese economy and its growth forecast to be only 4% in 2024.

The NWU business school expects global inflation to fall from 8.7% to 6.8% for the year, but underlying core inflation is projected to decline more slowly. The US Federal Reserve has decided to again keep interest rates unchanged and warned that further rises are possible. The business school adds that the US economy still appears to be the strongest driver of impacts to other economies.

Locally, South Africa experienced better-than-expected gross domestic product growth of 0.6% in the second quarter, as well as higher manufacturing volumes and construction activity, which the NWU business school believes is testament to private investment in the renewable energy sector.

Inflation is now within the South African Reserve Bank’s target range of between 3% and 6%, but the central bank is keeping interest rates unchanged for now.

Another source of potentially positive news is the closer collaboration between business and government to tackle urgent challenges in the spheres of energy, logistics and crime.

The business school says the successful Brazil, Russia, India, China and South Africa Summit in August also had a useful business spinoff.

Nonetheless, there is still a high degree of volatility and uncertainty in South Africa’s current growth dynamics, particularly as heavy loadshedding resumed for most of September, while household finances also remain strained.

Additionally, there is uncertainty around South Africa’s public finances and how it will be managed in the medium term.

The business school notes that negative trends such as policy uncertainty are reversible and remediable, especially if more energy reforms are implemented in coming months.

Financial services provider Nedbank describes the economic outlook for the rest of the year as “bleak”, with consumer spending remaining under great pressure and retail sales and credit demand weakening owing to higher borrowing costs and inflation.

“Monetary policy remains restrictive. There is also the unfolding scenario of ‘a tale of two deficits’ for South Africa in the period ahead, in both the balance of payments and public finance spheres,” the NWU business school adds.

Moreover, although the manufacturing sector has ticked up in recent months, its future momentum could be constrained by negative developments as a result of loadshedding, logistical challenges and vulnerable consumer demand.

The business school explains that consumer and business confidence are not yet high enough to strongly support economic activity. Unless ameliorated, these negative factors may well impart a brittleness to the economic outlook as this year draws to a close.

On the topic of public finances, the university says uncertainty is prominent in this space, owing to government’s tax revenues having fallen but spending remaining high.

The fiscal outlook is now much worse than projected in the February Budget, with weak corporate taxes and high public sector wages being the primary culprits.

The business school warns that, if serious fiscal sustainability concerns raise South Africa’s risk premium, it will lead to elevated interest rates.