South Africa’s business confidence eased slightly in May after a set of disappointing economic data that should influence sentiment in coming months, the South African Chamber of Business (Sacob) said on Wednesday.
Sacob’s Business Confidence Index (BCI) pulled back 1,7 index points to 100,2 in May from April’s 101,9, dragged lower by six of the seven real economic sub-indices that the chamber focuses on.
”Essential economic data released towards the end of May disappointed expectations and implied greater moderation, and even hesitancy, on a broader front,” Sacob said.
”The effect of this ‘worse-than-expected-information’ will influence the business mood more negatively in the months to come than is reflected by the BCI for May 2007.”
A slew of official data released in the last week of May showed the trade balance widening to R5,7-billion in April while credit growth also quickened and the main CPIX (consumer inflation less mortgage costs) inflation gauge targeted by the central bank pierced the upper end of a 3% to 6% band at an annualised 6,3%.
Analysts say the inflation breach could force the central bank to hike interest rates on Thursday after leaving them on hold at previous meetings in February and April.
”Although it was apparent that the Reserve Bank policy held certain risk, the actions by other economic role-players could provide the inflationary process with a life of its own, which, once started, is almost bound to continue for some period of time,” Sacob said.
”Higher inflation or greater price instability is detrimental to business confidence.”
The chamber reiterated that regulatory red tape, inefficient infrastructure management and poorly skilled workers were impediments to confidence, and were now also emerging as constraints to competitiveness.
A six-day old strike by public services, which in some instances has been accompanied by violence, was also a dampener on confidence.
”Service delivery by the public sector is already a case for serious concern to business and strike action may further exacerbate some of these inefficiencies,” said the business body. — Reuters