South African business confidence tanks to 2009 recession levels
South African business confidence fell to levels not seen since the 2009 recession this past quarter, as persistently weak business activity and concerns over politics weighed heavily, according to the Bureau for Economic Research and Rand Merchant Bank’s business confidence index.
According to second quarter data, business confidence fell to 29 points in the second quarter from 40 points in the first quarter, following the country’s first economic recession in 8 years. This indicates that just over 7 out of 10 are not confident in South Africa’s business future, noted RMB.
“Given the severe strain many industry respondents (and consumers for that matter) are under, a contraction in GDP for the year as a whole is not inconceivable,” said RMB.
However unlike unlike the 2009 recession, when authorities eased fiscal policy and aggressively cut rates to counter the decline in economic growth, RMB warns that it sees “no easy options” this time to restart economic growth.
“Given sovereign credit rating pressures, providing fiscal stimulus is not an option. And while it is not impossible for the Reserve Bank to lower rates, a deep-cutting cycle is most unlikely given the rand’s vulnerability to various global as well as domestic risks.”
In conducting the index’s survey, the BER takes the percentage of respondents that rates prevailing conditions as satisfactory as indicator or proxy of business confidence.
The composite RMB/BER Business Confidence Index (BCI) is the unweighted mean of five sectoral indices, namely that of manufactures, building contractors, retailers, wholesalers and new vehicle dealers.
Business confidence can vary between 0 and 100, where 0 indicates an extreme lack of confidence, 50 neutrality and 100 extreme confidence.
With Reuters.
Loading ...