Business confidence declines in August

Thursday, September 8, 2011

Pretoria - Business Confidence declined 98.6 points in August from 99 points in July, the South African Chamber of Commerce and Industry (SACCI) said on Thursday.

"Although the BCI dipped by only 0.4 index points between July and August 2011, the BCI was 4.7 points below the August 2010 level. This is the biggest year-on-year decline since the 5.2 points decline in September 2009," said SACCI.

On a month-on-month basis, the sub-indices representing activity in the real economy had a more positive impact on the BCI in August than in July. SACCI said the tempo of decline in July BCI appears to have moderated, although the current level remains under pressure.

Year-on-year, the real economic environment weakened noticeably as six of the seven economic activity sub-indices of the BCI were in negative territory. The financial environment, on balance, remained positive compared with August 2010, although two critical sub-indices, inflation and the exchange rate of the rand deteriorated.

The debt ceiling debate in the United States negatively impacted on the month of August. The financial markets were further impacted when the US sovereign credit rating was reviewed. The Eurozone's sign of stalling of its gross domestic product was another negative development, while China was tightening measures to quell inflation. 

These developments had a negative impact on the global economic outlook and on business confidence across the world, including South Africa.

"Economic growth also slowed substantially between the first and the second quarter in South Africa. The South African economy is also experiencing the further inflationary effects of price increases in certain consumer items like fuel, food and administrative prices. The exchange rate of the rand, that plays a pivotal role in the inflationary process, depreciated in August 2011."

The chamber said conventional fiscal and monetary measures to stimulate the global economy appear to have been exhausted.

"SACCI is growing increasingly concerned about the current and expected low levels of growth, stagnation of economic activity and job losses." - BuaNews

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