Business confidence lowest in 10 years

Business confidence in South Africa is at its lowest level in 10 years, according to the RMB-BER Business Confidence Index released yesterday. The index declined in the third quarter, falling by three points to 23. This was the index's lowest level in 10 years - a reading of 15 was recorded in the second quarter of 1999, just before the start of the last cyclical economic upswing in September of that year.

Business confidence in South Africa is at its lowest level in 10 years, according to the RMB-BER Business Confidence Index released yesterday. The index declined in the third quarter, falling by three points to 23. This was the index's lowest level in 10 years - a reading of 15 was recorded in the second quarter of 1999, just before the start of the last cyclical economic upswing in September of that year.

RMB said the third quarter decline in business confidence was the net outcome of different results for the individual sub-sectors comprising the overall index. The biggest decline was seen in the wholesale sector where confidence fell from a level of 36 in the second quarter to 17 in the third quarter.

"This represents the biggest decline among the various sub-sectors and suggests very poor wholesale trading conditions," RMB said.

Confidence continued to decline in the retail sector, whereas it increased in manufacturing and new vehicle trade.

In the case of building and construction, the business mood remained largely unchanged.

Based on declines in all retail sub-sectors (except new motor trade), overall retail business confidence dropped from 47 index points in the second quarter to 35 in the third quarter. "In contrast to what one would expect, the decline in confidence was not brought about by a further worsening in sales and order volumes, but rather by a sharp decline in selling prices, and thus deteriorating profitability," RMB said.

Manufacturing confidence jumped from a level of 11 index points in the second quarter to 22 in the third quarter.

"Buoyed by an improvement in foreign as well as domestic sales volumes, a bounce from such a heavily depressed level in the second quarter had been on the cards," RMB said.

It said that admittedly - from still very low levels - business confidence in new vehicle trade improved for the third quarter running, climbing from 12 index points in the second quarter to 19 in the third quarter.

"Rising confidence is consistent with the continuing moderation in the year-on-year rate of contraction in new passenger car sales," RMB said.

Confidence in the building sector essentially stabilised, increasing marginally from 23 in the second quarter to 24 in the third quarter.

Ettienne le Roux, RMB chief economist, said while it was possible to interpret declining overall business confidence as a sign of worsening economic activity in the third quarter, he supported an alternative view. "The recession, after having hit its worst point in the first quarter, continued to moderate in the third quarter," he said. - Sapa

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