Trade index reflects positive expectations

ALAN PEAT WE APPROACH year-end with confidence levels in SA commerce and industry hitting a high spot. The SA Chamber of Business (Sacob) business confidence index (BCI), for example, spiked at 130.9 in September then slackened back to 126.5 in October – a result, said Sacob, of a “measure of stability and mellowness” seeming to have set in. But October’s 126.5 is still at an exceptionally high level - and a whole 10-points above the 116.5 of October 2003. “The high business confidence level originates from a perceived favourable financial environment,” said the report, “and is now strongly embedded in robust real expenditure.” These spending conditions are perpetuated by a continuing strong rand – but the sustainability of these spending levels is increasingly coming under scrutiny. Current trade conditions, meantime, were measured by the trade activity index (TAI) of the SA Trade Management Indices (SATMI). This index sat at a buoyant 50 for October, the same as September. The trade expectations index (TEI), which measures expectations for trade conditions six months hence, continues to reflect a strong view that trade conditions will improve. The index only marginally decreased from 63 in September to 61 in October. “The TMI for September is indicative of an economy that is not experiencing undue difficulties,” said Dr Johan Botha, economist at Standard Bank, which compiles these statistics for Sacob. “This is coupled with quite optimistic expectations early next year – and this state of affairs is in line with our view that economic growth will accelerate in 2004 and 2005.” In euro terms, where the rand has appreciated, although much less than against the ever-weakening US dollar, SA’s merchandise imports increased by 24% in the first nine months of 2004 compared to the same period in 2003, whereas merchandise exports rose by 11.5%. Up to September, SA’s largest export destinations were Europe (40%), Asia (27%) and Africa (15%) while imported goods mostly came from Europe (43%), Asia (36%) and America (13%). Mineral imports, including fuel, rose by not less than 38% year-on-year in rand terms, or 64% in US dollar terms in the first three quarters. The happy state-of-affairs was confirmed by the latest confidence survey conducted by the Stellenbosch-based research unit, the Bureau for Economic Research (BER), on behalf of Rand Merchant Bank. “SA’s business confidence surged to 23-year highs in the fourth quarter of 2004,” said the report, “buoyed by strong spending triggered by low interest rates.” The BER business confidence index jumped 9-points to 88-points in the fourth quarter - just 3-points shy of a peak of 91 index points reached in the third quarter of 1980. “The fourth-quarter survey results indicate that domestic demand is at present at its most buoyant in many years,” said the BER. “Activity in the construction sector (a barometer of future expectations) is extremely lively, with shortages of skilled labour and raw materials on the increase,"