Business confidence is continuing to improve, the South African Chamber of Commerce and Industry (Sacci) said on Tuesday.
The chamber was releasing its Business Confidence Index (BCI) for September, which showed a notable improvement to 85,5 from 83 in August 2009.
”The BCI is 6,6 index points higher than the depressed level of 78,9 measured in March 2009.
”The September 2009 level is the best level recorded since November 2008, when the index stood at 86,7,” Sacci said.
The majority of the BCI sub-indices had a positive impact on the BCI in September on a month-to-month basis, suggesting that business confidence might continue improving over the medium term, Sacci said.
The majority of the year-on-year changes in the sub-indices were negative, except for inflation, the weighted rand exchange rate, precious metal prices and liquidations.
The improvement in business confidence might therefore be a slow process depending largely on healthier real global economic conditions.
”To fully comprehend the substance of the improved BCI, the latest level of the BCI must be viewed against the economic context we currently face.
”Given the slow economic global recovery and low inflation and even deflation in the United States, Japan, China and a number of other economies, it becomes apparent that markets may be too optimistic about the strength of the recovery of the global economy,” Sacci said.
It said that the International Monetary Fund, in its October 2009 World Economic Outlook, indicated that the pace of recovery was slow, and activity remained far below pre-crisis levels in some economies.
Sacci warned that South Africa had to be wary of a twin deficit risk (the public sector borrowing requirement and the current account deficit of the balance of payments) that could retard the country’s growth ability and recovery.
Crowding out the private sector from the capital markets in a low savings economy remained a risk for South Africa’s economic outlook, Sacci said.
”Business confidence and economic performance will, however, to a large extent depend on the pace of the global economic recovery and the ability of South Africans to seize opportunities,” Sacci said. — Sapa