SA first-quarter business confidence up

South African business confidence improved at its fastest pace in 16 years in the first quarter of 2010, led by better sentiment among car dealers, a survey showed on Tuesday.

But the quarterly confidence index sponsored by Rand Merchant Bank (RMB) and the Bureau for Economic Research (BER) remained well below 50 at 43 points, meaning most businesses are still negative about current economic conditions.

The index jumped 15 points compared with the previous quarter, adding to a recovery seen towards the end of 2009 when the economy pulled out of its first recession in nearly two decades.

RMB said in a statement the latest increase put the index back at levels seen before the height of global economic crisis 18 months ago, but warned the recovery in the economy was still fragile.

“Although there is no doubt that the economy is recovering, we are not yet in a broadly based upswing,” RMB chief economist Ettienne le Roux said. “The improvement remains patchy and heavily leveraged towards the health of global demand.”

RMB said the first-quarter rise was the biggest increase between two consecutive quarters in 16 years, but needed to be seen in context.

“Confidence remains in ‘net negative’ territory, and although the mood improved across all five of the sectors surveyed, increases were only particularly large in the cases of wholesale and new vehicle trade,” it said.

The survey showed new vehicle dealer confidence surged to 60 points in the first quarter of this year from 29 points in the previous period as motor sales returned to growth. Wholesaler confidence climbed to 50 from 27.

Retailers are generally optimistic about conditions, with that index at 51 from 41 previously.

Confidence among manufacturers is improving, but with that index at 28, the mood — outside of the car industry — still looked downbeat despite production showing signs of recovery from a severe slowdown last year.

Official data showed manufacturing rebounded in the fourth quarter of last year, helping the broader economy grow a faster-than-expected 3,2%, but the sector still has some way to go to return to pre-recession levels.

The South African Chamber of Commerce and Industry’s monthly business confidence index improved to 83 in February from 81,2 the month before. — Reuters

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