South African business confidence decreased substantially by 11 points in the second quarter of 2017, the worst level since the 2009 recession, Rand Merchant Bank (RMB) said on Wednesday.
According to the RMB/Bureau for Economic Research (RMB/BER) business confidence index released on Wednesday, confidence declined across all of the five sectors surveyed and might signal that the current business cycle downswing was becoming even more pronounced.
The RMB/BER index said second quarter pessimism was widespread, with confidence indices falling in all five of the underlying sectors and with all readings below the neutral level of 50.
At a reading of 29, the business confidence measure declined 11 index points from a level of 40 in the first quarter. Confidence was last this depressed during the great global led recession of 2008/09.
The survey said this was reflecting political uncertainty and concern over the economic policy outlook, as well as “persistently weak business activity”.
New vehicle dealers suffered the sharpest decrease in sentiment. This reflects expectations of even more conservative spending behaviour on discretionary goods by consumers.
The RMB/BER survey said depressed consumer confidence, high unemployment, subdued credit extension and modest growth in disposable income were expected to affect consumers’ willingness and ability to spend.
South Africa’s unemployment in the first quarter of 2017 increased by 1.2 of a percentage point to 27.7 percent, the highest figure since September 2003.
The South African economy last week entered a technical recession for the first time since 2009 after growth contracted by 0.7 percent in the first quarter of the year.
The economy slowed by 0.3 percent in the last quarter of 2017, meaning that it has had two consecutive negative growth quarters which technically signals a recession.
South Africa’s credit rating has also been downgraded to sub-investment grade by major agencies, with the recent downgrade coming from Moody’s Investor Services which, however, kept it at investment grade with a negative outlook.
The RMB/BER survey said depressed business confidence reflects expectations of suppressed future economic growth which therefore indicated that the private business sector will not add jobs or boost investment at the present time.
– African News Agency (ANA)
