Busi­ness con­fi­dence bounces back in July

The Star Early Edition - - NEWS - Ka­belo Khu­malo

BUSI­NESS con­fi­dence in South Africa rose to its high­est level in six months on Tues­day, sup­ported by stronger new ve­hi­cle sales and the first in­ter­est rate cut in five years.

Data re­leased by the SA Cham­ber of Com­merce and In­dus­try (Sacci) showed that the Busi­ness Con­fi­dence In­dex (BCI) in July re­turned to lev­els last seen in Fe­bru­ary.

Sacci said the BCI surged to 95.3 points, 0.4 per­cent higher than in June, but 0.7 per­cent lower than in July 2016.

The SA Re­serve Bank took the mar­kets by sur­prise last month, reducing the repo rate by 25 ba­sis points to 6.75 per­cent, cit­ing the im­proved out­look for in­fla­tion as the rea­son for the cut.

The cen­tral bank halved its 2017 growth fore­cast to 0.5 per­cent and trimmed its pro­jec­tion for next year to 1.2 per­cent.

Sacci said the main con­trib­u­tors to the im­prove­ment in the BCI in July came from higher ve­hi­cle sales, the pass­ing of more build­ing plans, lower in­fla­tion and higher share prices.

Sacci said the largest neg­a­tive con­trib­u­tors to the BCI be­tween July last year and July this year were lower merchandise im­port and ex­port vol­umes, the rand ex­change rate, an in­crease in the real cost of fi­nanc­ing, and lower share prices.

Ve­hi­cle sales

Early this month, Na­tional As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers of South Africa said to­tal ve­hi­cle sales in­creased 4.1 per­cent be­tween June and July, from 45 369 to 46 719 units. Of the to­tal re­ported sales, about 79.2 per­cent rep­re­sented dealer sales, 13.8 per­cent went to rental fleets, 3.9 per­cent to gov­ern­ment and 3.1 per­cent to cor­po­rate fleets.

The up­beat Sacci in­dex is in di­rect con­trast with the in­dex is­sued in June by Rand Mer­chant Bank (RMB) and the Bureau for Eco­nomic Re­search (BER), which in­di­cated that busi­ness con­fi­dence in the sec­ond quar­ter of this year slumped to lev­els last seen in 2009, largely be­cause of per­sis­tently weak busi­ness ac­tiv­ity.

The RMB/BER BCI plunged 11 points to 29 points in the pe­riod, with nine out of 10 re­spon­dents say­ing they viewed busi­ness con­di­tions as un­sat­is­fac­tory.

Sacci econ­o­mist Richard Down­ing said the ANC’s pol­icy con­fer­ence last month failed to boost busi­ness con­fi­dence.

“Busi­ness is still wait­ing for a pre­scrip­tion on the longer term,” Down­ing said.

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