Business confidence to gain momentum

Johannesburg - The positive trend in business confidence is expected to gain momentum, the SA Chamber of Commerce and Industry (Sacci) said on Wednesday.

In a statement, it said its Business Confidence Index (BCI) had increased by one index point to 84.2 in April 2010, 2.8 points higher than in April 2009.

"This represents only the second year-on-year increase in 30 months," Sacci said. 

Between April and March 2010, nine BCI sub-indices had a positive effect on the BCI.

Four sub-indices had a negative impact on the BCI in April 2010 on a month-on-month basis.

Sacci said domestically there was growing support for the view that most economic indicators had advanced beyond their lower turning points.

"The key economic constraint remains low levels of household consumption expenditure which restrains stronger business activity," Sacci said.

Although the 2010 readings of the BCI remained relatively subdued,  the positive trend was expected to gain momentum, mainly as a result of export led demand and improving global economic circumstances.

"However, the public debt problems of Greece, does present the risk of contagion if not addressed decisively."

Sacci said public debt management concerns in the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) had the potential to put the eurozone at risk and affect the global economy on a more intensive scale.

Apart from Greece, the other PIIGS countries were also under constant scrutiny for possible public financial default.

 "Although Greece is regarded as an advanced economy, global market participants will also critically view the fiscal and public finance policies of emerging markets."

Sacci said that demand for financing for public sector programmes in South Africa would be evaluated against the background of recent developments in Greece and the other PIIGS countries.

"The Greece fault-line has once again made the world aware of the fragility of the present recovery and policy-makers must tread cautiously if the sustainability of the present recovery is to be assured."

- Sapa