Business Maverick

RMB/BER INDEX

Business confidence slumps again in third quarter, but ‘all is not lost’

Business confidence slumps again in third quarter, but ‘all is not lost’

The RMB/BER Business Confidence Index slumped again in the third quarter, a worrying sign for an economy that contracted in the previous quarter. But RMB says ‘all is not lost’, though the lights at the end of the tunnel are faint.

The RMB/BER Business Confidence Index (BCI), a widely watched measure of business and, by extension, investor confidence, fell to 39 in Q3 from 42 in Q2. That extends its recent decline – in the second quarter it dropped to 42 from 46. 

At 39 out of 100, the BCI signals that 61% of respondents are unsatisfied with prevailing business conditions, and who can blame them? 

Rolling blackouts continue apace, inflation has been surging and the economy contracted in the previous quarter, bringing national output back below pre-pandemic levels. Meanwhile, interest rates are on the rise, global economic growth is slowing and the state is still withering away under ANC rule, which is ham-fisted at best and downright predatory at worst.

Still, RMB cautioned that “all is not lost … While on the face of it, this is a disappointing outcome, the underlying picture is not as bad as the lower BCI implies”.


Visit Daily Maverick’s home page for more news, analysis and investigations


“Confidence among retailers and wholesalers remains well above long-term averages, which speaks to the surprising resilience of consumer spending, this at a time when falling inflation in due course should ease the pressure on disposable income. Simultaneously, underlying activity in the building as well as the manufacturing sector is stronger than third quarter confidence figures seem to imply,” RMB said. 

RMB also cautioned that faltering business confidence in Q3 does not necessarily point “to another outright contraction in real GDP”. That would give rise to the r-word – recession – and the scant data out so far for this quarter, such as the Absa Purchasing Managers’ Index (PMI), suggests a tentative rebound.

Absa Purchasing Managers’ Index springs back into positive territory

Having said that, the fall of business confidence from an already low level surely suggests that a recession remains a possibility. But it is hardly an inspiring sign or a green shoot. Manufacturing confidence, for example, eased further to 26, and this was a sector whose woeful performance sealed the Q2 economic contraction.

Read more in Daily Maverick: “South Africa’s GDP contracts 0.7% in second quarter,…”

On the other hand, there are some encouraging signs. 

“Underlying activity in the building as well as the manufacturing sector is stronger than third-quarter confidence figures seem to imply. Notable, too, is the fact that fixed investment in manufacturing, after a temporary drop in the second quarter, resumed its upward trajectory to a level that is now close to its long-term average,” said RMB. 

In short, a mixed bag which, at best, suggests a tepid recovery. 

“None of this is to say that the economy will experience strong growth in the year ahead; external headwinds are mounting, interest rates will continue to rise while the danger of summer power outages is ever present. But suggestions that the economy is now in the throes of a protracted recession after yesterday’s GDP release is an overstatement,” said Ettienne le Roux, chief economist at RMB. DM/BM

Gallery

Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

X

This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.


Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

We would like our readers to start paying for Daily Maverick...

…but we are not going to force you to. Over 10 million users come to us each month for the news. We have not put it behind a paywall because the truth should not be a luxury.

Instead we ask our readers who can afford to contribute, even a small amount each month, to do so.

If you appreciate it and want to see us keep going then please consider contributing whatever you can.

Support Daily Maverick→
Payment options

Daily Maverick Elections Toolbox

Feeling powerless in politics?

Equip yourself with the tools you need for an informed decision this election. Get the Elections Toolbox with shareable party manifesto guide.