Business confidence declines in October

Thursday, November 3, 2011

Pretoria - Business confidence continued to decline in October, falling more than what was anticipated, said the South African Chamber of Commerce and Industry (SACCI).

In October the monthly Business Confidence Index (BCI) declined to 97.5 or by 0.9 points from 98.4 in September. This is the fourth month it has fallen in a row.

The real economic environment on balance has positively affected business confidence in October 2011 compared to October 2010 as four of the seven sub-indices were in positive territory.

"The financial environment maintained a stable position compared to October 2010, but the depreciation of the weighted rand exchange rate and its volatility are cause for concern," noted the chamber, adding that consumer and producer inflation, household borrowing, share prices and the rand deteriorated since October 2010.

"Of special concern is the much higher producer inflation, lower share prices and the weaker rand exchange rate. However, the weaker rand holds positive as well as negative consequences for global trade and investment," said SACCI.

Sluggish borrowing by business as well as households was an indication of uncertainty with regard to their financial health and the direction of financial environment.

"Although the aggregate financial environment has deteriorated, South Africa's relative financial stability could be described as fair to positive. The slow resolution of international public sector debt problems and low global economic growth contributed to uncertainty in the global business environment."

SACCI said although the global economy was reeling under the uncertainty of the public debt problems in certain countries, the general resolve was to reinstate prudent fiscal and monetary regimes.

"The emphasis is directed at maintaining real economic stability and efficacy and to promote and enhance sound financial practices in the public and private sectors. Business confidence however, remains very fragile under the present delicate and uncertain global financial conditions," it said.

The index is a composite weighted index of 13 sub-indices which include retail sales volumes and new vehicle sales.