Subdued Business Confidence
The SACCI Business Confidence Index (BCI) for April 2012 declined by a further 1.4 index points to 94.3. This follows the 3.8 index points decline to 95.7 in March 2012. The 94.3 is the lowest level for the BCI in three years and is 8.2 points below the April 2011 level.
An unstable and weakening business environment accompanies the volatility in the BCI at present. Following poor performance in March, there were short-term (monthly - m/m) positive improvements in April 2012. Two of the six financial sub-indices were positive and one was neutral in April 2012. The real economic environment was also more encouraging although only marginally so, with three of the seven sub-indices impacting positively (m/m) on the business mood in April 2012.
Over the medium-term, the annual (y/y) comparison shows that five of the thirteen sub-indices improved on a year earlier in April 2012. Three of the seven real economic sub-indices made positive contributions (y/y) to the BCI in April 2012.
Household debt remains a serious problem globally. Debt restructuring programs can significantly reduce debt repayment burdens, but could undermine the ethic and morale of responsible borrowing. Further house price declines, additional contractions in output, and accommodating policies could also only prolong the impact of over-borrowing by households.
SACCI noted that credit extension figures for March 2012 increased markedly; given the current levels of household debt, borrowing should be done with circumspection to avert painful adjustments later on. Sound and sustainable economic growth should be enhanced to inspire more households with credible financial credentials to become more active economic participants. Business remains ready to accommodate sound sustainable consumer demand.
For a full background to this month's SACCI BCI see the Economic Commentary in the BCI report on www.sacci.org.za.
Statement issued by Mr. Richard Downing, SACCI Economist, and Mr. Neren Rau, SACCI CEO, May 3 2012
Click here to sign up to receive our free daily headline email newsletter
