Business confidence shows first noticeable rise in year

BUSINESS confidence improved in the current quarter as strikes in the first half of the year and in July ended and production returned to normal.

A protracted strike at platinum mines and a strike by steel and engineering workers disrupted production at manufacturing plants, particularly vehicle producers.

The quarterly Rand Merchant Bank/Bureau for Economic Research's business confidence index rose five points to 46 in the third quarter – the first noticeable rise in more than a year, according to RMB.

The 46 implied that just shy of five in every 10 respondents in a survey rated prevailing business conditions as satisfactory. The survey was conducted among 2300 firms between August 4 and September 2.

The index measures confidence levels in five sectors – retailers, wholesalers, builders, manufacturers and new vehicle dealers. Sentiment improved in all the sectors except new vehicle dealers.

RMB chief economist Ettienne le Roux said factors such as a recovery in the residential building sector, a small improvement in underlying manufacturing activity and the expectation of confidence levels among new vehicle dealers improving should help underpin economic growth.

Confidence among wholesalers increased by 15 index points to 59. The sales of non-consumable goods, such as machinery, chemicals and building materials, benefited "greatly" from the end of the strikes as well as from the return to higher activity levels in the residential building sector.

Retailers' confidence rose further to 60 points in the third quarter from 49 in the second – the first time in 2½ years that confidence was back in net positive terrain.

Sales volumes did not increase across all categories, RMB said. Clothing and hardware sales rebounded strongly, while food and furniture sales volumes deteriorated.

"Although the recent improvement in retailers' confidence is unlikely to be sustained, those selling to high-income households appear better placed than those with low-income earners as clients."

The confidence of building contractors increased from 45 to 53 – the first time since the 2008 recession that the index was above the 50 neutral mark. RMB said residential building activity put in a strong performance, while nonresidential stagnated.

Manufacturing confidence increased marginally from 25 to 28 index points as sales and production recovered only partially from the poor performance in the strike-affected second quarter.

Confidence in the new vehicle sector plummeted to 28 from 43 in Q2. - Ntsakisi Maswanganyi