30 Nov 2004

Just as it appeared as if business confidence could not increase much further, it jumped by 9 index points during the fourth quarter. Although the BER expected another rise, the size of it came as a pleasant surprise. At 88, the RMB/BER business confidence index (BCI) is close to the peak of just below 91 index points reached in the third quarter of 1980. This makes the current reading the highest in close to a quarter of a century.

During the fourth quarter, confidence rose further in all the sectors covered in the BER’s business surveys. What is more, confidence in all sectors, barring manufacturing, currently hovers around, or is above, 90 index points. This means that nine out of every ten respondents are satisfied with prevailing business conditions. The biggest jump in confidence occurred among building contractors, where the level now stands at 93 (up from 79 previously). In the trading sectors confidence is at or near record levels.  Retailers are at 90 (82), wholesalers at 90 (86), and new vehicle dealers at an astonishing 98, up from 87 in the third quarter.

It is gratifying that the confidence of manufacturers recovered further, rising from 63 to 67 index points during the fourth quarter. However, it is still more than 20 points below the confidence level of the other sectors covered.  That the manufacturing sector is lagging, is largely explained by the impact of the rand’s strength on manufacturers’ ability to compete abroad, and to compete in the domestic market against imported products.

Points from the detail of the fourth quarter survey include:

1.    Business activity continued to expand in all sectors at a higher rate than in the third quarter.

2.    Wholesale is the only sector that reported sales volume growth a little below expectations.

3.    All sectors (except wholesale) expect current heady growth in business activity to slow in the first quarter of 2005.

4.    All sectors reported net employment growth.

5.    Despite strong demand, upward pressures on prices remain largely absent.

Conclusion

The fourth quarter survey results indicate that domestic demand is at present at its most buoyant in many years. Activity in the construction sector is extremely lively, with shortages of skilled labour and raw materials on the increase. While the subsectors of manufacturing which compete in foreign markets or against foreign products are still struggling, the sector as a whole is recovering, with two thirds of all respondents satisfied with business conditions. Respondents expect economic activity to soften from its unprecedented fourth quarter pace to a lively, but more sustainable rate during the first quarter of 2005.

The fourth quarter survey was conducted between 25 October and 22 November and the results were processed on 23 November 2004. Questionnaires were mailed to a panel of approximately 3 000 manufacturers, retailers, wholesalers, vehicle dealers and building contractors.