/ 11 March 2009

Business confidence at lowest level in 10 years

Business confidence was at its lowest level in 10 years, according to the RMB/BER Business Confidence Index published on Wednesday.

The index declined by six index points — from 33 during the final quarter of 2008 to 27 during the first quarter of this year.

”This is the lowest level in 10 years and implies that only about a quarter of respondents rate prevailing business conditions as satisfactory,” RMB said in a statement accompanying the release of the index.

The RMB/Bureau for Economic Research Business Confidence Index can vary between zero (when all respondents rate prevailing business conditions as unsatisfactory) and 100 (when all respondents rate prevailing business conditions as satisfactory). A reading of 50 signifies a neutral level.

According to RMB, the global economy had deteriorated further since the previous survey in November 2008.

”Consumer spending, fixed investment as well as manufacturing volumes have fallen in many countries,” the statement said.

”At the same time, international trade contracted, the financial crisis intensified in developed countries and global share prices again tumbled,” the statement added.

However, in light of these developments, the six index point drop in the RMB/BER Business Confidence Index was ”relatively mild”.

”At 27, business confidence in South Africa has also not declined to the same low level as in other countries, and is still well above the previous South African lows of 1978, 1986, 1993 and 1999,” RMB said.

A number of developments explained why business confidence did not fall by more during the survey quarter.

These include the 150 basis point fall in interest rates since December and the expectation of further declines; a R2,35 drop in the petrol price between November and February; a relatively stable rand exchange rate; and a confidence-boosting and stimulatory National Budget announced on February 11, RMB said.

The RMB/BER Business Confidence Index is calculated as the average confidence level in five sectors — manufacturing, retail, wholesale, motor trade and building.

The survey was conducted between February 2 and March 3 2009. — Sapa