Business Confidence continues to improve

Tuesday, October 6, 2009

Johannesburg - The September Business Confidence Index (BCI) improved to 85.5 compared to 83 index points recorded in August, the South African Chamber of Commerce and Industry (SACCI) said on Tuesday.

"The BCI is 6.6 index points higher than the depressed level of 78.9 measured in March 2009. The September 2009 level is the best level recorded since November 2008 when the index stood at 86.7," SACCI said.

According to the SACCI, the majority of the BCI sub-indices had a positive impact on the BCI in September 2009 on a month-to-month basis suggesting that business confidence may continue improving over the medium term.

It noted, however, that the majority of the year-on-year changes in the sub-indices were negative with the exception of inflation, the weighted rand exchange rate, precious metal prices and liquidations.

The Chamber said that the improvement in business confidence may be a slow process depending largely on healthier real global economic conditions.

"To fully comprehend the substance of the improved BCI, the latest level of the BCI must be viewed against the economic context we currently face.

"Given the slow economic global recovery and low inflation and even deflation in the US, Japan, China and a number of other economies, it becomes apparent that markets may be too optimistic about the strength of the recovery of the global economy," it explained.

According to the International Monetary Fund's October 2009 World Economic Outlook, the pace of recovery was slow and that activity remained far below pre-crisis levels in some economies.

It warned that South Africa should be wary of a twin deficit risk (which is the public sector borrowing requirement and current account deficit of the balance of payments) that could retard the country's growth ability and recovery from the economic crisis.

"Crowding out the private sector from the capital markets in a low savings economy, remains a risk for South Africa's economic outlook.

"Business confidence and economic performance will however to a large extent depend on the pace of the global economic recovery and the ability of South Africans to seize opportunities," said SACCI.