Picture: 123RF/LE MOAL OLIVIER
Picture: 123RF/LE MOAL OLIVIER

Business confidence was stuck in the doldrums  in the second quarter, hovering at a two-year low, according to a quarterly index compiled by by Rand Merchant Bank (RMB) and Stellenbosch University’s Bureau for Economic Research

The business confidence index, released on Thursday was flat at 28 index points, unchanged from the first quarter, with seven out of 10 respondents remaining dissatisfied with current conditions. The outcome was inline with the Bloomberg consensus forecast.

Domestic sales volumes deteriorated in each of the five sectors of the index, with the drop-off particularly noticeable in the case of manufacturers, retailers and new vehicle dealers, RMB said. Of concern was that the majority of respondents continued to report difficulties in their ability to pass on costs to consumers.

The index had fallen three points to 28 in the first quarter of 2019.

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First- and second-quarter confidence was only slightly higher than the low of 27 reached in the second quarter of 2017 and in the first quarter of 2009 following the global financial crisis.

The data indicated that business conditions remained unsatisfactory, and in particular for the manufacturing sector, it was necessary to reconsider the regulatory burden imposed by the state, while ensuring it fulfilled its intended function, Investec chief economist Annabel Bishop said in a note.

“The deindustrialisation trend continues in SA, with unemployment rising alongside it, as industry is also seen to continue to face regulatory blockages and a high regulatory burden, with anecdotal evidence even of some inconsistent, and arbitrary application of these regulations,” Bishop said.

The BCI reflects the results of a survey of 1,800 businesspeople. The bulk of the responses were submitted between May 15 and June 3 2019

The building sentiment subcomponent rose seven points to a still low 30, consistent with an absolute scarcity of new work, RMB said, while retail confidence rose a modest four points to 24. Losses in other sectors offset these gains, however.

The subdued confidence was a bad sign for those hoping for a second-quarter economic rebound, RMB said.

“SA will not be able to shift to a lasting higher growth and prosperity path without more short-term pain,” RMB chief economist Ettienne le Roux said. Âhis time around, the country cannot rely on the global economy to counterbalance such internal adjustment costs as global growth itself is now shifting to a lower gear,” he said.

gernetzkyk@businesslive.co.za