Business confidence improves in February

Wednesday, March 3, 2010

Pretoria - February's Business Confidence Index (BCI) showed signs of improvement, said the Chamber of Commerce and Industry (SACCI) on Wednesday.

In February the index increased by 1.8 index points between January and February to 83 points. However this is 1.5 points below the February 2009 level. BCI for January declined to 81.2 points.

"The BCI has performed as expected in February 2010 with business confidence responding to positive medium term economic developments," said SACCI in its monthly release.

Fewer sub-indices had positive impact on the BCI in February. Despite this, lower liquidations data and increased manufacturing output had a significant impact on the index. SACCI said the negative influence of international trade through both import and export volumes continued to weigh on the local business environment.

On a year-on-year basis, eight sub-indices had a positive impact on the BCI in February 2010 two more than it did in January 2010.

"The additional positive contributions in February came from sub-indices on real economic activity, suggesting enhanced levels for the BCI in 2010," said the chamber.

The chamber said that in February, several major events and announcements supported greater economic optimism but that there were also a number of factors that contributed to uncertainly or the possibility of unintended outcomes over the medium term.

It added that service delivery as prioritised by President Jacob Zuma in his State of the Nation Address was essential to ensuring fiscal discipline and value for budgeted allocations.

"Debt servicing cost will cause a significant shift in functional expenditure towards the category general public services over the next three years, unfortunately at the expense of mainly economic services."

The release of Statistics South Africa (Stats SA)'s fourth quarter 2009 Gross Domestic Product data indicated that, although the volume of goods and services produced was still 1.4 percent less than a year ago, the turnaround that started in the third quarter 2009 was gathering momentum.

"Unintended economic consequences will emerge as the relative price of electricity and its share of costs to business and consumer expenditure changed substantially. Business confidence would have received stronger support if the approach to electricity supply and pricing had been appropriately managed over the longer term," said SACCI.