Small bounce in business confidence, but the picture is still bleak
The RMB/BER business confidence index for the third quarter showed an economy still stuck in the doldrums, though it rebounded slightly from the dismal second-quarter plunge.
The BCI came in at 35 points — up from 29 points in the prior quarter but still far below the above-50 level that indicates expansion.
RMB chief economist Ettienne le Roux said there had been "no major new unsettling political events" in the period.
Since 2008 the BCI has been above the neutral 50-point mark on only four occasions.
Improvement in business confidence is critical for reinvigorating the economy, and a ramp-up in economic growth is key to avoiding further credit rating downgrades.
The manufacturing and motor trade sectors both reported improved sentiment in the third-quarter survey, but confidence remained very low in both sectors.
"Aided by an increase in production volumes, confidence among manufacturers rebounded from 16 to a still low 27. Similarly, new vehicle dealers’ confidence bounced back, rising from 11 to 19 in the third quarter as sales volumes accelerated somewhat," Le Roux said.
Depressed business confidence ... increases the risk that pessimism will become entrenched, further delaying a recovery to fast, job creating economic growth.Kamilla Kaplan, Investec
Confidence among retailers and wholesalers was little changed, with the former inching up to 38 from 35 and the latter falling to 48 from 49. This was the only sector to post a decline.
Retail trade sales data for July are due later on Wednesday, and are expected to show growth in sales slowed slightly from June’s 2.9%.
Building confidence rose from 36 to 44.
The RMB/BER business confidence index is based on 1,600 regular participants in the five most cyclically sensitive sectors of the economy. The field work for the third-quarter survey was done in the last two weeks of August.
Investec economist Kamilla Kaplan had expected business confidence to remain depressed.
"Depressed business confidence reflects the perception that economic weakness will be prolonged and increases the risk that pessimism will become entrenched, further delaying a recovery to fast, job creating economic growth," she said.
Le Roux said on Wednesday that "the improvement must be seen in the broader context of continued weak domestic demand, subdued business activity, low profitability (for most respondents) and heightened political uncertainty.
"This is not the environment in which the economy is about to experience a resurgence. In fact, the more likely scenario is one where GDP growth remains stuck at around 1% over the short to medium term, hamstrung by lacklustre private sector fixed investment and jobs growth.
"While falling inflation and … lower interest rates will provide some temporary impetus, clear determination as well as action from policy makers to implement appropriate structural reform is the only durable way through which SA will be able to turn its growth fortunes around," he said.
"In this regard, concrete moves towards effectively governed state-owned enterprises, skills advancement and quality education, improved immigration policies and less red tape, to name but a few measures, would be a good start."