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Confidence in SA business conditions remains high

Confidence in South African business conditions remained high, but could be dented by electricity supply problems and the recent Transnet strike, Rand Merchant Bank (RMB) has said. The most recent RMB/BER business-confidence index, for the first quarter of 2006, showed a reversal of the one-percentage point decline of the previous quarter, the bank said in a media statement.

"The index rose from 85 to 86 basis points, and remains just below the late 2004 reading of 88, which was the highest level since 1980," it said. "Such a long period of uninterrupted positive confidence has not previously been recorded in the 30-year history of the index." Confidence increased among new-vehicle dealers, building contractors, retailers and manufacturers, but dropped among wholesalers.

"The main reason for the fall in confidence of wholesalers was a sharp decline in the sub-index relating to consumer goods, as their sales to retailers weakened unexpectedly.

"Considering the increase in retail confidence, this is difficult to explain, but it might have to do with more wholesalers being bypassed by retailers," the statement read.

The general rise in business confidence suggested that economic activity did not continue moderating in the first quarter of 2006. With interest-rate hikes unlikely this year, confidence should remain strongly positive, RMB said. 

"However, it would be surprising if electricity supply problems experienced in Cape Town and elsewhere, as well as the Transnet strikes, do not have some impact on confidence and activity.


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