Business Maverick

RMB/BER INDEX

Business confidence dips in second quarter, but building sector finds new signs of life

Business confidence dips in second quarter, but building sector finds new signs of life

The RMB/BER Business Confidence Index fell to 42 from 46 in the second quarter. This signals that almost 60% of the 1,300 managers surveyed in the building, manufacturing, retail, wholesale and new vehicle trade sectors take a dim view of prevailing business conditions. After economic growth surprised on the upside in the first quarter, this bodes ill for the second quarter.

RMB noted in a statement that the Business Confidence Index is back to the low levels obtained in the second half of 2021. 

“Various shocks over the past year have contributed to keeping confidence this low and many uncertainties remain,” it said. 

These included the KwaZulu-Natal floods in April and the return of industrial-scale load shedding – overriding themes of this quarter. Manufacturing confidence slid to 29 from 43, largely as a result of these twin shocks. Combined with other indices such as the Absa Purchasing Managers’ Index – a key measurement of confidence in the sector which has also lost ground so far this quarter compared with where it stood in March – it all suggests that the manufacturing segment of the economy had been waylaid after expanding almost 5% in the first quarter. 

“The headline result, while discouraging, hides large variations among the sectors. Although manufacturers and new vehicle dealers experienced a sharp deterioration in sentiment, building contractors by contrast turned decisively more upbeat. Confidence among retailers and wholesalers remained largely unchanged at relatively high levels,” RMB said. 

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Indeed, building confidence was a pleasant surprise and suggests that there may be newfound signs of life in a labour-intensive sector that has long been in the doldrums. 

“Building confidence jumped from 25 to 46, an increase extending what has been a gradual improvement since sentiment hit rock-bottom during the height of the Covid pandemic. Contractors in the residential property market experienced a notable increase in activity in the second quarter. While the same cannot be said of the non-residential sector, activity did stabilise at a slightly improved (but still depressed) level,” RMB said. 

Overall, the index has had some wide variations over the past couple of years. It plunged to five – out of 100 – in 2020 during the initial hard lockdowns, which in hindsight took a wrecking ball to the economy while doing little to contain the pandemic. It rebounded all the way to the neutral 50 mark a year ago, but has since been stuck in the forties. It will take more than a spurt in residential house construction to lift it back into positive territory above 50. 

It is also the latest sign that economic growth this quarter has slowed significantly after expanding a surprisingly fast 1.9% in the first quarter, which brings the overall gross domestic product number back to prepandemic levels. Among other things, a faster pace of growth requires increased investment, which in turn requires higher levels of business and consumer confidence. DM/BM

 

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