Business confidence in the red

2011-09-09 00:00

A SECOND key business confidence index released this week has slumped to a worryingly low level, although an influential national business chamber does not believe that the economy will enter a second recession.

The latest Business Confidence Index (BCI) of the South African Chamber of Commerce and Industry (Sacci) for August 2011 came in at 98,6 points from 99 points in July 2011. The latest BCI is 4,7 points lower compared to a year earlier.

A level below 100 signals a disturbingly low BCI level.

The BCI is a composite index that takes into account 13 key macro-economic indicators that affect the decisions made by businesses.

The Sacci BCI follows the release of the Rand Merchant Bank/Bureau for Economic Research BCI earlier in the week, which declined by nine points to 39 in the third quarter of 2011.

The BCI was weighed down by a range of international factors, including the U.S. debt ceiling debacle, poor eurozone growth and a tightening of monetary policy in China. Closer to home, higher inflation and a weakening rand also pushed the BCI into lower territory.

Sacci CEO Neren Rau told The Witness yesterday that despite the challenges facing the real economy, it is unlikely to experience double-dip recession.

However, he added, South Africa could experience a quarter of negative economic growth. Rau said Sacci is deeply concerned that 2012 will be yet another year of economic stagnation punctuated by low to moderate economic growth.

“We previously hoped that the South African economy would benefit from better manufacturing output and higher trade levels, but we can see that the international markets have their own challenges.”

Rau said Sacci’s trade survey, which has been in negative territory in recent months, is likely to remain depressed. In this context, it is hoped that domestic demand will stimulate opportunities for economic growth and job creation.

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