‘Sharp drop’ in economic confidence

2011-06-27 10:48

Urban South Africans’ confidence in the economy is at its lowest point since February 2009, according to the TNS Research Surveys economic confidence index (ECI) for April.

“The overall ECI has dropped nine points to 128 from its 2010 high of 137 achieved in May and November [May 2002 was 100], and is the lowest the index has been since February 2009,” TNS said in a statement.

The index is made up of two components: how people are feeling now about the economy, and their expectations for the next six months.
The component measuring how they feel now dropped by 17 points from 151 in November last year to 134 in April this year.

It had increased through last year and ended in November on levels not seen for almost three years.

“The expectations component dropped by six points from 132 to 126, continuing its decline from a relative high at the start of last year, which suggested then that people were apprehensive about this year – that the current component has indeed fallen suggests that their negative expectations have indeed come to pass,” TNS said.

The index should be seen in context of consumer price inflation remaining in the lower half of its target range of 3% to 6%.
Interest rates dropped by 50 basis points in September and in November last year to their lowest point in 30 years and have remained steady since then.

However, the petrol price rose for seven successive months, to just below R10 a litre in April.

TNS said the drop in the current component of the index was “driven by a strong decline in sentiment around people’s personal circumstances and a particularly strong drop in feelings about current business conditions”.

Expectations were down due to poorer sentiment about the business environment in the second half of the year, and concerns about inflation.

There was also negativity around the ease of finding jobs in the second half of the year as well as concerns about people personal circumstances.

“After a positive end to 2010, there has been a sharp decline in sentiment in the first half of 2011, this centring on a perceived more hostile business environment, this being expected to worsen as 2011 moves into its second half,” TNS said.

“Coupled with inflation concerns, people are expecting their own personal economic circumstances to suffer this year.”
The index was calculated via a survey of 2000 metropolitan adults.

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