Further decline in business confidence

Its business confidence index (BCI) for May dropped 1.5 index points to 92.8, from 94.3 in April. This was its lowest level since November 2002, Sacci announced on Thursday.

Its most recent low was during the recession in March 2009, when it reached 93.1. “The current downward trend in the BCI that started in April 2011 has weakened further, to mark a conspicuous deterioration in the business mood,” Sacci said.

There were notable negative movements in the sub-indices during May. Only two of 13 sub-indices of the BCI were positive month-on-month.

Three of the sub-indices improved year-on-year. These were household spending (retail and vehicles), government spending, and lower real interest rates.

“Sacci is concerned that the fiscal tightrope that Europe needs to walk while balancing economic sustainability and political intolerance will leave Europe’s debt crisis unresolved for the short to medium-term,” the chamber said.

“The contagion from the economic impasse in Europe is gaining in global impact as faster growing economies are now also experiencing a slowdown, while circular and multiplier effects continue to grow.”

These unstable economic circumstances posed serious challenges to the South African business environment and to business confidence.

The lack of alignment in economic policy positions caused concern. In an increasingly perplexing domestic economy, business sought policy stability.

Electricity output deteriorated, and borrowing by municipalities declined. The relative price of electricity declined, but the prices of water and gas increased.

“Sacci is disturbed as the composite sub-index for municipal services deteriorated on a month-on-month and year-on-year basis in May 2012 on what was already a low level,” it said. – Sapa

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