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”.

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“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.

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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