Business confidence loses vigour

Johannesburg - Business confidence lost momentum in December, the SA Chamber of Commerce and Industry (Sacci) said on Thursday.

Business confidence retracted by 0.6 index points to 83.5 in December 2009, according to Sacci's Business Confidence Index (BCI).

"After the BCI reached its highest level of 2009 of 85.5 in September, it appears to have lost momentum and has moved laterally since then," Sacci said in a statement.

The annual average of 82.8 for 2009 was the lowest annual figure for the BCI since the 81.9 of 2002.

"The volatility of the BCI around the average of 82.8 for 2009 indicated uncertainty and tentativeness in the business environment."

Sacci said that on an average annual basis, only two sub-indices - the rand exchange rate and consumer inflation - had made a positive impact on business confidence in 2009 compared to 2008.

The other 11 sub-indices on average negatively affected business confidence in 2009.

From month-to-month, seven of the BCI sub-indices had a positive impact on the BCI in December 2009 compared to eight in November 2009.

"It appears that all the sub-indices except real retail sales have moved beyond their lower turning points," Sacci said.

The volatility of business confidence in 2009 followed the local economy's difficulty in finding a comfortable recovery.

"Although the third-quarter GDP [gross domestic product] data confirmed that the technical recession had ended, many of the consequences of the recession still pervade the local economy."

Sacci said although the markets had factored in a more brisk recovery, both the global and local economies were struggling to recover from the impact that the substantial disruption of the international financial system had on the real economy broadly, and on global trade in particular.

"Locally, public sector management challenges and looming administrative price adjustments contribute to uncertainty in the economy and in business confidence," Sacci said.

"The recovery in business confidence will only be led by evidence of real macroeconomic improvements."

Sacci said it was optimistic that the economy would register a positive real growth rate of 2% or more in 2010.

"Public sector activities may remain counter-cyclical for the most of 2010, with administrative prices under strong surveillance.

"With monetary policy remaining at its current neutral/positive stance, gradual recovery in other economic indicators and the prospect of a successful Soccer World Cup, business confidence is likely to seek a higher average for 2010 than in 2009."

- Sapa