ECONOMY
Business confidence rises
Posted Wed, 06 Jul 2005
Although the business confidence index of the SA Chamber of Business increased to its highest level so far this year, there were economic developments which could adversely affect future confidence, the chamber said.
The index (BCI) increased to 128.2 in June 2005 from 127.0 in May, Sacob economist Richard Downing told reporters on Tuesday.
"This is the highest level this year and is 2.4 points above the lowest level so far in 2005, namely the 125.8 in January," he said.
However Sacob anticipated the future BCI could be restrained due
to the rand's depreciation, inflation showing signs of increasing
from its present low, the high crude oil price, and strong real
household demand through increased borrowing.
He said Sacob feared that some external factors such as the high
crude oil price may also take a toll on business confidence and
economic growth.
Downing said another concern was that annual increases were well
above consumer
inflation.
Businesses were having to bear this cost burden and it could
have an inflationary impact. Inflation was currently at three
percent and the average of increases around six percent.
Continuing on labour issues, he said the country urgently needed
to relook at ways to create more jobs. Technology was replacing
people and labour was also not necessarily dealing with its own
plight well, by for example striking because of job losses.
Downing said the African National Congress should not have
shelved its "dual labour market" proposal with slacker labour laws
for smaller companies.
"It's a pity the two-tier labour system is off the table,
because we need to look at new ideas [to create jobs].
"Otherwise we could have labour turmoil which could lead to
political instability which will negatively affect... investment in
the country," he said.
Sacob president Deidre Penfold said she did not believe that a
recent
countrywide strike by the Congress of SA Trade Unions on job
losses had had a negative impact on business.
However she said it would be interesting to see the effect
future strikes would have on the economy. "It will hit us at some stage or another," Penfold said.
On wage hikes she said: "We don't want them (employees) to go
hungry, but increases have to be measured against inflation."
On inflation, Downing said the real overdraft rate declined to
its lowest level since June 2004.
Given the present spending scenario in the economy and a
declining savings ratio to below 13 percent of the Gross Domestic
Product in the first quarter of this year, it was doubtful whether
an easier monetary policy stance could be decided on.
Standard Bank economist Johan Botha agreed, saying the bank
expected the interest rate to remain where it was for the rest of
the year.
Botha released a Standard Bank and Sacob survey on Tuesday which
is
based on trading conditions from a business perspective.
The results for June 2005 indicate that trade conditions
deteriorated marginally compared to May, but trading activities
remained at a high level. Sales volumes were essentially unchanged,
as well as new orders.
He said inventory levels contracted slightly due to the slightly
weaker trading conditions.
Trade expectations regarding the medium term remained high and
robust.
Current job prospects in the trade environment were somewhat
brighter as well as the outlook for employment towards the end of
the year.
Trading conditions varied between provinces.
Gauteng, the Eastern Cape, the North West and Limpopo were
positive about present conditions, but all other provinces
experienced more difficult conditions as they moved into negative
territory.
However expectations in all provinces were positive.
Sapa
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