Export volumes knock business confidence

The Business Confidence Index (BCI) has taken yet another plunge dropping to 85.8 in May, the lowest it has been in nearly a year. According to Neren Rau, CEO of the South African Chamber of Commerce and Industry (Sacci), the BCI has registered its lowest level since July 2010 and the lowest level so far in 2011, but managed to remain 3.8 points above May 2010. The previously anticipated upward momentum has failed to gain a foothold and now the BCI faces the prospect of a downward trend. He said the largest negative impact on the BCI was from export volumes, followed by import volumes, new vehicle sales and retail sales. The rand exchange value, share prices and inflation in the financial component of the BCI also made a negative contribution to business confidence. “It does not bode well for the coming months,” said Rau. “The BCI needs to be above 90 if the economy is at least just churning along. But we are just not reaching that target of 90 with it hovering around 86 in recent months. It dropped 1.1 points from April to May.” He said while South Africa had shown an unexpectedly high GDP growth of 4.8% in the first quarter of 2011, it was unlikely to see this continuing for the rest of the year. He said the biggest contributor to the increased growth was the manufacturing sector. “But the sector is not creating jobs. The retail and vehicles sales as well as the construction industries, the indicators of the domestic economy, are all in the negative and thus the lack of job creation.” Rau said while Sacci had been upbeat about the future, the continuous decline of the BCI was extremely worrying. “For the first time we have to admit that our future is not looking good. If we do not turn this downward trend around we are going to be in trouble.”