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Business confidence dips to seven-year low

South African business confidence fell further in the second quarter of 2008, knocked by rising interest rates, high food and fuel costs and violent attacks against foreigners, a survey showed on Wednesday.

The quarterly confidence index sponsored by Rand Merchant Bank and the Bureau for Economic Research dropped three points to 45, a new seven-year low.

The result means that less than half of respondents are happy with current business conditions.

Business confidence increased by five index points in the case of the wholesale sector (from 45 to 52) and by four index points in both the retail (from 52 to 56) and motor trade sectors (from 30 to 34). After this uptick, still only a third of motor dealers were satisfied with prevailing business conditions compared to more than half of wholesalers and retailers.

The other two sectors making up the index — building and manufacturing — fared dismally compared to the consumer sectors.

Manufacturers’ confidence declined by nine index points (from 46 to 37) to its lowest level in eight years. Weaker order volumes, as well as cost and margin pressures probably weighed down on respondents, said the researchers.

However, the decline in manufacturer confidence pales against the massive 21 index points drop of building contractors’ confidence, which fell from 68 to 47.

Building contractor confidence has therefore swung from a situation where two-thirds of respondents were satisfied with prevailing business conditions to one where less than half are satisfied.

The major contributing factors were most likely rising interest rates, falling house prices and delays in the granting of electricity certificates for new projects, say the survey analysts. – Reuters, I-Net Bridge

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