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Business Confidence Plunges
| News by Staff ReporterThe RMB/BER BCI fell nine points in the third quarter of 2011
The latest business confidence index by Rand Merchant Bank and the Bureau for Economic Research has revealed that confidence in Q3 2011is at a one-year low.The Rand Merchant Bank (RMB) and the Bureau for Economic Research (BER) Business Confidence Index (BCI) fell to 39 in the third quarter of 2011, its lowest level in over a year, after dropping seven points to 48 in the second quarter, according to data released on Tuesday.
“After declining by seven points to 48 in the second quarter, the RMB/BER Business
Confidence Index fell by a further nine points to 39 in the third quarter of 2011.
“A reading of 39 indicates that six out of 10 respondents are unsatisfied with prevailing business conditions,” it stated.
RMB/BER said although confidence is at its lowest level in over a year, the number is still nearly twice as high as that registered at the worst part of the recession in 2009.
Business confidence was seen to decline in the new vehicle trade, manufacturing and wholesale trade sectors during the third quarter, while remaining virtually unchanged in the building and retail trade sectors.
“Confidence in the building sector remained frustratingly low,” said RMB/BER, “easing from 21 index points in the second quarter to 20 in the third quarter.
“The decline would have been larger if it had not been for some improvement in the mood of non-residential building contractors.”
RMB/BER added that two consecutive quarter declines in the BCI did not necessarily mean the business cycle upswing was ending, “as confidence does not usually increase in a smooth fashion during an economic upturn.
“For instance, over the course of the 1999 to 2007 upswing, there were instances in 2000 and in 2002/03 where sentiment deteriorated for several quarters only to subsequently improve again.”
Be that as it may, said RMB/BER, the drop in confidence and weaker underlying developments in all sectors (excluding retail) still suggest that the upturn has lost some steam.
“Following the slowdown from an annualised growth rate of 4.5% in the first quarter to 1.3% in the second quarter, real GDP growth in all likelihood remained weak in the third quarter.
“Also, business confidence survey results have for some time now indicated that strong wage inflation, among other sharp cost increases, are starting to take their toll on employment creation," RMB/BER said.
“The upswing will remain fragile until the factors that normally drive durable expansions, such as rising fixed investment, job growth and increased credit spending, kick in.”
Source: www.bizpremises.co.za
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