29 Nov 2005

Business confidence remained very strong during the fourth quarter. The RMB/BER business confidence index (BCI) declined by an insignificant one index point, to 86 from 85 in the previous quarter. This decline is so small that for all purposes business confidence remained unchanged at an extraordinarily high level.

The experience of the five sectors surveyed differed somewhat, but all remained in strongly positive territory - a figure of 50 would indicate that the Bureau's 3000 respondents are evenly split between those who are and those who are not satisfied with current business conditions:

• New vehicle dealers' confidence declined by 7 index points (from 99 to 92), so moving from a situation where all dealers were satisfied with prevailing business conditions to one where a still overwhelming nine out of ten were satisfied. The fourth quarter decline can partly be attributed to a correction from an abnormally high level, but also to the perception that the decline in interest rates, which had buoyed vehicle sales to record levels over the past three years, may have come to an end.
• Wholesalers' confidence increased by 6 index points (from 84 to 90).
• Building contractors' confidence remained extraordinarily strong. It declined by two percentage points (from 94 to 92) and reflects the ongoing strength of the residential and non-residential property markets. 
• Retailers' confidence weakened by three points (from 85 to 82). While a reading of 82 is still very high, the small decline is in line with the slightly slower growth in retail sales volumes since mid-year.
• Manufacturers' confidence remained unchanged at 68 during the fourth quarter. As recently as the end of 2003 this sector's confidence was still in net negative terrain (that is, below 50). That confidence has recovered so strongly, probably reflects the fact that many manufacturers have adapted to the currency's strength, but somewhat weaker rand year-to-date no doubt providing an added bonus.

In conclusion: The fourth quarter BCI indicates that economic activity remained lively during the fourth quarter. Also, sustained high business confidence levels bode well for economic growth in the new year. The BCI's extraordinary performance over the past year may be another indicator that the buoyancy of the South African economy had to date not been fully captured by official gross domestic product statistics. With this in mind, it could well be that StatsSA's annual revision of historical GDP data (to be published on 29 November) show a much improved picture.