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PRESS RELEASE- BUSINESS CONFIDENCE INDEX
Confusing Business Conditions
SACCI’s Business Confidence Index (BCI) declined marginally to 97.4 or by 0.1 points in November 2011 from 97.5 in October 2011.· The steadying of the BCI in November creates the possibility that the downward momentum in business confidence may have abated although the economic environment remains tentative.· Should the November 2011 SACCI BCI imply that the business mood has stabilised, the stabilisation has unfortunately occurred at less than desirable levels.
On an annual basis, the real economic environment on balance remained positive and benefited business confidence in November 2011 with four of the seven sub-indices being positive.· The financial environment was stable compared to October 2010, but the depreciation of the rand and inflation will have negative impacts on business confidence.
The debt crisis in Europe is deeper rooted than public debt levels, debt financing and debt structure.· Within the Eurozone it became evident that the fiscal imbalances were reflective of different community and economic values.· This contributed to many an impasse in efforts to bring about speedy resolutions to the challenges of member nations.· More European countries may be on review for a downgrade while continuing disagreements on how to tackle the region’s debt crisis risk was damaging to financial stability.· Challenges relating to effective coordination of fiscal and monetary policy remain a theme in the Eurozone public debt crisis.
South Africa also felt the effects of lower global economic growth and the financial instability in Europe.· South Africa registered meagre economic growth for the third quarter 2011 with the tertiary sector setting the tone.· Subdued economic activity is expected to continue in the fourth quarter 2011 and well into 2012.
Although the pace of decline in business confidence has receded, South Africa experienced a few unfortunate developments that dampened the business mood.· Apart from sluggish economic growth, South Africa’s image as a prudently-managed economy was affected by the change in the outlook for its credit rating from stable to negative.· Regular reassurance to the markets of conservative fiscal management, appropriate fiscal priorities, leadership inspired by pragmatism as opposed to populism and a rebalancing from policy and ideological debates in favour of delivery could all serve to mitigate an actual sovereign downgrade.
For a full background to this month’s SACCI BCI click here
Source - SACCI
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