Business confidence dips

The Business Confidence Index dropped five points to 67 in the fourth quarter, Rand Merchant Bank said on Wednesday.

Senior economist Ettienne le Roux said the drop would slow down economic growth in 2008.

“A reading of 67 indicates that two thirds of respondents were satisfied with prevailing business conditions,” he said.

Business confidence was, however, still within net positive territory, but was noticeably down from a reading of 80 recorded six months ago and the peak of 88 three years ago.

“The primary drivers of the decline in business confidence have been the reduced volumes and lower price margins,” Le Roux said.

He said sales volumes and price margins played a critical role in the success of a private business as they largely decided profits, given that most expenses could not be reduced significantly in the short run.

The weaker business volumes could be attributed to issues such as tighter financial conditions and successive interest-rate hikes on top of high outstanding household debt levels.

In addition, the tightening of credit standards—following the introduction of the new National Credit Act—was curbing business volumes in most of the credit-driven consumer sectors such as new vehicle trade and residential building.

High food and petrol price increases were particularly hurting the lower market segment’s real purchasing power and as a result were beginning to adversely affect its spending.—Sapa

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