Lower merchandise import and export volumes dragged the SA Chamber of Commerce and Industry (Sacci) business confidence index (BCI) down in May to its lowest level in almost two years, despite the waning Covid-19 pandemic and easing of lockdown restrictions.
Sacci’s index declined 4.4 points to 89.3 in May, down from 93.7 in April, 95.6 in March and 85.7 in September 2020. It is also 7.7 index points lower year on year. This was much lower than the 94.3 forecast.
The higher real financing costs, the decline of the all-share index on the JSE and the problem of load-shedding also weighed on the overall business mood. But the month-to-month increase of real value of building plans and manufacturing propped up the BCI.
Sacci said in a statement on Tuesday that it “might take a while for the economy to recover and gain momentum, given prevailing global economic conditions and structural economic challenges that followed on the lockdown regulations”.
BCI gauges activity from vehicle and retail sales to export and import volumes, as well as energy supply and stock prices. As a quantitative survey collecting data, it is more a reflection of the business climate than sentiment as reported by businesses themselves.
The index has been gradually recovering after slumping in early 2020 as Covid-19 took hold, but there is a current downturn. The index dipped as low as 70.1 points in May 2020 — its lowest since 1985.
The latest GDP data last week showed SA’s economy grew 1.9% in the first quarter, after an upwardly revised 1.4% rise in the previous period, but Sacci points out that the BCI is often at odds with GDP data, because of information lags and changes in expectations.
“Although the general trend in business confidence during the first three months of 2022 was positive and in harmony with improved economic activity [GDP growth], a more negative sentiment in the business climate occurred in April and May 2022,” Sacci said.
This was partly because of the war in Ukraine hurting the European economy, in particular, because of the continent’s reliance on Russian gas and oil, compounding global supply chain problems and higher commodity prices, in particular crude oil and vital agricultural produce for global markets.
The International Monetary Fund (IMF) and the World Bank have revised their outlook for global economic growth as the war continues.
The devastating floods in KwaZulu-Natal in May added to the general unease as businesses lost property, equipment and stock.
Higher inflation led to central banks hiking interest rates and a slowdown of economic activity.
“Financial markets mirror that unease and are putting additional pressure on investors. Cryptocurrencies have, for instance, been part of the casualties of the global economy disruptions,” Sacci said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.