The South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) stood at 89.3 in May – its lowest level since the 85.7 of September 2020.

The BCI declined from 95.6 in March to 93.7 in April and then further to 89.3 in May.

The latest gross domestic product (GDP) data that was released recently indicates that the economy continued to catch up since the second quarter of 2020 by further growing at 3% year-on-year in the first quarter of the year, Sacci says.

However, information lags, changes in expectations and the dynamics of the business mood are at times at variance with real economic developments, it points out.

As a result, the industry body emphasises that the present dip in the BCI must also be reconciled with other economic and financial market data.

The average of 95.5 for the BCI in the first quarter was 1.2 index points higher than the average for the corresponding period in 2021.

“Although the general trend in business confidence during the first three months of 2022 was positive and in harmony with improved economic activity (GDP growth), a more negative sentiment in the business climate occurred in April and May.

“The BCI lost 6.3 index points between March and May and was 7.7 index points lower in May 2022 than in May 2021,” Sacci outlines.

In the short-term (month-to-month), the increased real value of building plans passed was the only subindex that positively influenced the business mood in May, Sacci notes.

It says the decline in merchandise import and export volumes had the most negative and notable impacts on the BCI in May.

The higher real financing costs (interest rates adjusted for inflation) also had a negative but less distinct effect on the business climate. The decline of the all-share price index on the JSE reflected some uncertain business perspectives and expectations. The inconsistency of energy supply (electricity) further weighed on the overall business mood, Sacci outlines.

The BCI for April and May also confirmed a medium-term (year-on-year) negative sentiment.

The BCI lost momentum as all of the subindices, except for increased real credit extension to the private sector, contributed positively to the business mood.

Although widespread, the most negative year-on-year effects came from declining merchandise export volumes and rising inflation. Decreased merchandise import volumes and declining share prices also made relatively less negative impacts on the business mood if compared to last year April and May, Sacci says.

“It however appears that the health effect of the Covid pandemic has largely waned, while scrapping of the State of Disaster and easing on regulations have freed the economy to a degree and contributed to further normalising economic activity as reflected by the latest GDP data.

“It might take a while for the economy to recover and gain momentum given prevailing global economic conditions and structural economic challenges that followed on the lockdown regulations,” Sacci states.