SACCI PRESS RELEASE
EMBARGO: 11:30 on Thursday, 7 April 2016
Reticent Business Confidence
SACCI today released the SACCI Business Confidence Index (BCI) for March 2016 at the Offices in Rosebank, Johannesburg.
The SACCI Business Confidence Index (BCI) has been clawing back some losses and gradually improved to 81.2 in March 2016. The BCI is 7.9 index points below the March 2015 level and is an improvement on the annual difference of 12.7 index points of February 2016. It appears that the sharp decline in the BCI from the middle of 2015 to the end of 2015 has been arrested with the BCI hovering above the 80 mark.
The changes in six of the thirteen sub-indices BCI were positive in March 2016, two stayed unchanged and five were negative. Two real activity sub-indices and four financial sub-indices contributed positively to the BCI in March 2016 with the financial climate being more favourable to the business climate than in February 2016. The largest positive monthly contribution came from merchandise export volumes, merchandise import volumes and share prices. The weighted rand exchange rate made a lesser but also positive contribution in March 2016.
Four of the seven real activity sub-indices had a positive year-on-year impact on the BCI in March 2016 while only one of the six financial sub-indices had a positive year-on-year effect. The largest positive year-on-year contributions to the BCI in March 2016 came from merchandise export volumes Comment: Please relook this – it is a repetition of the above paragraph and the real value of building plans approved with the largest negative year-on-year contributions to the BCI came in the order of the rand exchange rate, then new vehicle sales followed by share prices.
SACCI is concerned about the impact of inflationary expectations notably on input costs of business. With consumer inflation measuring 7% in February 2016 and producer inflation at 8.1% electricity tariffs set to increase by 9.4% on top of an increase of 12.8% year-on-year in February 2016 raise concern. Food prices increases due to the drought and the possibility of raw agricultural produce and staple foods imports and the weak rand could be as high as 20 and 25% in the medium-term. This could cause inflation to rise well above the upper target range of the Reserve Bank.
Confirmation that South Africa has been in a downward phase of the business cycle since the end of 2013 necessitates appreciation for the difficult road ahead. Given the sluggish growth performance of the world economy and low international commodity prices, the local economy will continue to experience major challenges. It is however important that the positive tone set by the ConCourt on Constitutional Democracy and affirmation of the role of Chapter 9 institutions be supported by appropriate policy action that could enhance the domestic business climate.
For a full background to this month’s SACCI BCI see the Economic Commentary in the BCI report on www.sacci.org.za.
For more information, contact:
Alan Mukoki SACCI CEO 011 446 3800
Richard Downing SACCI Economist