Tuesday, 10 July 2018
Cautious business confidence
Today SACCI released the June 2018 SACCI Business Confidence Index (BCI) at its Offices in Rosebank, Johannesburg.
The SACCI BCI declined by 0.3 index points in June 2018 and measured 93.7, compared to 94 in May 2018. For the first time this year, the BCI was below the level of a year ago – namely 1.2 index points lower than the 94.9 in June 2017. The average for the BCI in the first six months of 2018 was 97.6, compared to the average of 95 in the first half of 2017, and 93.7 in the second half of 2017.
Four of the thirteen sub-indices of the composite SACCI BCI positively affected the business climate on a month-on-month basis in June 2018. Two sub-indices were neutral, while seven sub-indices reflected negativity in the business environment.
The biggest negative month-on-month influences on the business climate were the weaker trade-and-investment-weighted rand exchange rate, lower real retail sales, the decreased real value of building plans passed, and the higher, less stable, cost of energy supply. Higher merchandise import and export volumes, and increased new vehicle sales, made positive month-on-month contributions to the business climate.
Increased, new vehicle sales, lower inflation, and the increased real value of building plans passed, were the sub-indices that contributed positively to the SACCI BCI year-on-year in June 2018.
There are indications that although fiscal challenges remain, government debt is showing signs of being contained, albeit at a high level. Rating agencies suggest negative factors are mitigated by government’s debt structure, and a sound banking sector. Financial challenges of state institutions, however, remain substantial and government debt must be stabilised.
SACCI noted that South Africa has, of late, experienced a sharp weakening in the balance of payments position (BoP). This has resulted in a larger deficit on the current account, as well as net selling of bonds and shares by non-residents. This led to additional volatility and weakening of the rand exchange rate.
The risk of a global trade war has alerted certain industries in South Africa, and they have already indicated it would affect industries and employment negatively, while knock-on effects have been cited by complementary industries and their export performances.
It has become imperative that structural economic matters hampering inclusive economic growth should be addressed with economic rationality. Uncertainties surrounding economic policy direction and position should be clarified so that investor and business confidence can reaffirm itself.
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 082 822 5566
Read the BCI report here: