POLITICS

Business confidence vulnerable - SACCI

Real economic environment weakened noticeably

Vulnerable Business Confidence

SACCI's Business Confidence Index (BCI) declined further from 99.0 in July 2011 to 98.6 in August 2011 with 2010 as the base year at 100 index points (see report - PDF).  Although the BCI dipped by only 0.4 index points between July and August 2011, the BCI was 4.7 points below the August 2010 level. This is the biggest year-on-year decline since the 5.2 points decline in September 2009.

On a month-on-month basis, the sub-indices representing activity in the real economy had a more positive impact on the BCI in August 2011 than in July.  The tempo of decline in the BCI experienced in July 2011 appears to have moderated although the current level remains under pressure.  On a year-on-year basis, the real economic environment weakened noticeably as six of the seven economic activity sub-indices of the BCI were in negative territory. The financial environment, on balance, remained positive compared to August last year although two critical sub-indices, i.e. inflation and the exchange rate of the rand, deteriorated.

The month of August 2011 was also negatively impacted by the debt ceiling debate in the United States. The financial markets were further impacted when the US sovereign credit rating was reviewed. A further negative development was that the gross domestic product (GDP) of the Eurozone showed signs of stalling while China was tightening measures to quell inflation. These developments had a negative impact on the global economic outlook and on business confidence across the world including South Africa.

Economic growth also slowed substantially between the 1st and the 2nd quarter in South Africa. The South African economy is also experiencing the further inflationary effects of price increases in certain consumer items like fuel, food and administrative prices. The exchange rate of the rand, that plays a pivotal role in the inflationary process, depreciated in August 2011.

Conventional fiscal and monetary measures to stimulate the global economy appear to have been exhausted. SACCI is growing increasingly concerned about the current and expected low levels of growth, stagnation of economic activity and job losses.  SACCI calls on business leaders of small and large enterprises and government, labour and civil society leaders, to support its Annual Convention, and contribute to a robust discussion on how to realise business opportunities and equip the economy to turn the tide on economic stagnation and job creation.

Statement issued by Mr. Richard Downing, SACCI Economist and Mr. Neren Rau, SACCI CEO, September 8 2011

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