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South Africa business confidence reaches a new high

The March Business Confidence Index (BCI) improved to its most impressive levels since September at 88.3 points, the South African Chamber of Commerce and Industry (SACCI) reported on Tuesday.

“The latest BCI figures are 5.1 index points better when compared with last year and is also at its best level since September 2008 when the BCI was standing at 89.9,” reported SACCI.

Just two of the seven real economic activity sub-indices ended up being positive – retail trade and building activity.

“The financial and economic environment continued to be conducive towards a optimistic business climate within the short-term. Threats towards the optimistic views within the financial environment include things like new risks in the global economy, commodity price movements in addition to geo-political lack of stability and uncertainty.”

Despite the fact that the BCI improved upon a year-to-year basis in March, South Africa’s general performance within the global trade environment could very well restrict advancements in business confidence in the event that global competitiveness conditions are not dealt with actively.

The contributions of the sub-indices when using an annualised basis ended up being evenly balanced for the reason that six sub-indices ended up being positive while six happen to be negative, at the same time one remained undecided.

“Concern adn uncertainty gripped the global economy along with stock markets combined with foreign currency markets responding nervously to the earthquake in Japan on 11 March 2011. Following on from the initial worry about the consequences associated with the crisis and catastophe in the world’s third largest economic system, the general opinion seems to be of the fact that longer-term implications of the catastrophe for the global economy and financial systems will likely be somewhat muted,” outlined SACCI.

It stated that the Japanese economy is going to take some time to recover as infrastructure repairs take place. The rate at which the damaged rail and road networks are repaired as well as at which corporate operations are actually restored is going to ascertain the pace of the Japanese recovery.

In addition, the political chaos and uncertainty in the Middle East and North Africa, which encompassed a lot more regions for the duration of March 2011, “is without a doubt of greater immediate concern because of the current as well as possible influence on the crude oil price along with the consequences for global inflation,” said SACCI.

“The domestic economy generally seems to have regained a bit of momentum in business confidence, having said that the index continues to be sensitive to domestic socio-economic developments. The conduct of the local government elections, the decisiveness with which corruption is tackled along with the level of labour dispute activity will likely be crucial determinants of whether the BCI breaches the significant level of 90.”

Source: BuaNews

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Business Confidence improves from recession

South Africa’s Business Confidence Index (BCI) in July recorded the second highest reading this year at 84.3 points, the South African Chamber of Commerce and Industry (SACCI) said on Thursday.

The July figure of 84.3 points is 1.1 point above the July 2009 level following on June 2010’s 84.8 points.

“The figure has improved from the recession but it is still not good enough at the moment,” said SACCI economist Richard Downing of the BCI’S composite weighted index of 13 sub-indices that include new vehicle sales and merchandise import and export volumes.

According to the chamber, the month of July 2010 renewed focus away from the sentiment of the World Cup and returned it to the economic reality of a domestic economy struggling to gain momentum.

The global economy also reflected tensions as the pace of positive financial market developments outpaced a lagging real economy, SACCI said, adding that business confidence has yet to perceive strong and real economic prospects.

“If July 2010 is compared to June 2010 (month on month) five sub indices of the BCI were positive, four were negative and four remained neutral,” said the chamber. Sub-indices of the volumes of merchandise exports as well as imports recorded a relative strong performance compared to previous months.

“The Soccer World Cup 2010 was an exceptional success and although it raised expectations during June 2010, a special effort is required to sustain the positive momentum and enhance the business outlook. Stronger domestic demand and stronger posturing in the international trade environment are necessary to promote sustained improvements in business confidence.”

SACCI said that relative to July 2009, eight of the BCI sub-indices improved with real retail sales and building construction still lagging recent economic improvements. It said that increase in liquidations is a legacy of the recession and the period of exuberance before the recession.

“Higher real financing cost came about by default as inflation trended lower and nominal interest rates remained unchanged,” said SACCI.

The volatility of the exchange rate at present it said is primarily a function of the global financial flow of funds rather than a current account phenomenon.

“South Africa’s highly developed financial markets provide a comfortable platform for these flows to take place over the short term providing the potential for substantial returns. Leads and lags on proceeds or payments of global trade transactions also exaggerate the volatility of the rand exchange rate,” explained SACCI.

It said though the present rand strength was causing some discomfort, the reasons for the strength should be looked at before ill- conceived policy on intervention is implemented thereby contributing to economic distortions with potential unintended consequences for the economy.

BuaNews, openpages.com, sacci.org.za

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