Stable markets boost business confidence
July 7, 2009
By Stella Mapenzauswa
South African business confidence rose last month, helped by economic data and financial market movements suggesting stabilisation, although recovery was tentative, a survey showed yesterday.
Business confidence has taken a knock over the past year, as depressed local and global demand for domestic products has slashed mining and manufacturing output.
The business confidence index increased to 83.1 points last month from 81.8 in May, lifting the average for the second quarter to 82.3 compared with 81.9 in the first quarter, the SA Chamber of Commerce and Industry (Sacci) said yesterday.
"Although still broadly depressed, a number of economic indicators suggest that the decline of the economy has bottomed out and that some economic activities may even have turned," Sacci said.
However, the demand for local goods and services remained strained.
South Africa fell into recession in the first quarter when gross domestic product shrank at a 6.4 percent annual pace after a 1.8 percent contraction in the fourth quarter of last year.
The central bank has reduced interest rates by 450 basis points since December to ease pressure on the economy. However, the bank left its repo rate unchanged at 7.5 percent at last month's policy meeting, as consumer inflation remained stubbornly high at 8 percent.
Sacci said a recently approved 31.3 percent price increase for electricity would contribute to higher inflationary expectations and risks.
The body urged caution and restraint in economic policies as South Africa struggles to pull itself out of recession.
The ANC government under President Jacob Zuma has reassured investors that it will continue to pursue business-friendly policies, but is under pressure from its communist allies to adopt a more populist stance.
"The fragility that underpins the promise of stability makes it vulnerable to suffocation if not supported by the appropriate economic policies," Sacci said. - Reuters
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