Business confidence dropped by four index points in the second quarter of this year, Rand Merchant Bank (RMB) and the Bureau for Economic Research at Stellenbosch University reported on Tuesday. They said the index decreased to 48.
“Although just a small drop, the result is nevertheless meaningful,” RMB chief economist Ettienne Le Roux said.
“Not only is the index now back in net negative terrain — where pessimism exceeds optimism — but the decline in sentiment was also widespread.”
Business confidence fell in four of five sectors in the second quarter.
In the manufacturing, retail and wholesale sectors, sentiment deteriorated by eight, nine, and 10 index points respectively. In the new motor vehicles trade it worsened by five.
However, confidence rose by 15 points in the building sector. If it was not for this, business confidence would have dropped by eight points.
Le Roux said that in the context of continued labour unrest, warnings of power outages, and a sharp fall in the value of the rand, a bigger than four index points drop could have been expected.
Infrastructure bottlenecks, skills shortages, and high and rising administered price inflation needed to be addressed. Persistent strong growth in unit labour costs was also needed, Le Roux said.
“Indeed, the performance of the economy can be described as one of weakness, mixed together with some pockets of resilience,” he said.
“For South Africa to break loose from this low and unsatisfactory growth path, the global economy needs to recover more forcefully and the local constraints holding the economy back must be tackled with greater vigour.” — Sapa
