|Business Confidence Retracts|
|Tuesday, 10 November 2009 11:09|
The SACCI Business Confidence Index (BCI) for October 2009 was released today, 9 November 2009. The SACCI Business Confidence Index (BCI) fell by 3.3 points to 82.2 in October 2009 diminishing the gain of 2.5 points in September 2009. Although still higher than the depressed level of 78.9 measured in March 2009, the return to a level of four months ago indicates that maintaining higher business confidence levels will need continuous efforts to stimulate a favourable business environment.
It appears that the extent of the short-term improvements in the sub-indices is not enough to move the BCI onto a clear positive trajectory. Most economic activity is still below their long-term trend lines although the lower cyclical turning point may have been passed.
On a month-to-month (m/m) basis, seven of the BCI sub-indices had a positive impact on the BCI in October 2009 while on a year-on-year (y/y) basis a majority (nine) of the BCI sub-indices still had a negative impact on the index. The financial sub-indices on inflation, the rand exchange rate, precious metal prices and share prices were positive on a month-to-month as well as on year-on-year basis in October 2009. However, it appears that the extent of the short-term improvements in the sub-indices is not enough to move the BCI onto a clear positive trajectory.
Between September 2009 and October 2009 only five sub-indices impacted negatively on the SACCI BCI namely, liquidations, manufacturing output, retail sales, new vehicle sales and real financing costs. One sub-index remained unchanged i.e. real private sector borrowing.
The Medium Term Budget Policy Statement (MTBPS) does provide an insight into government’s plans ahead of the Budget in February next year. The MTBPS reaffirms government’s spending priorities and indicates that servicing public debt will lay claim to more resources in the medium term.
SACCI is concerned that the increase in the deficit before borrowing to 7.6% of GDP is going to demand more capital from the economy and that dis-saving by government can again become a feature of public finance. The borrowing requirement by the public sector, estimated at 11.8% of GDP, may be an underestimate and will pressure the domestic savings pool available to the private sector.
SACCI believes that business confidence will benefit from the easing of exchange controls announced by the Minister. While businesses are still reeling from the consequences of the recession and households are uncertain, government’s strategies must be based on proactive responses to evolving economic conditions in order to re-establish confidence among economic stakeholders.
For more information contact:
Mr. Richard Downing Economist for SACCI 082 822 5566
Released by the SACCI, Johannesburg – 10 November 2009