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Business confidence hits a four year low as South Africa's economy limps along

by , 09 September 2015

Today saw the release of the RMB/BER business confidence index data for the third quarter of this year.

The data showed that the index is now sitting at levels not seen since 2011.

So what's putting pressure on the index?

Let's take a closer look…


Business confidence dips again


The business confidence index (BCI), which the Bureau for Economic Research conducts and Rand Merchant Bank sponsors, slid again from June to August this year, says Fin24. This has stoked worries that South Africa is on the brink of recession.

The survey “covered 2,000 firms in the building, manufacturing, retail, wholesale and motor trade sectors,” says BDLive. More than 60% of those surveyed “were unhappy about prevailing business conditions”.

The index fell to “its weakest since late 2011,” notes IOL. It highlighted that “sentiment [was] particularly low among retailers and wholesalers”.

The business confidence index fell “five points to an almost four year of 38,” reports BDLive. This follows a six point fall over the second quarter.


Could a recession be looming for SA?


The chief economist at RMB, Ettienne le Roux, said when the index falls “below 30” it was a sign of “pending recession,” adds BDLive.

RMB said there was a stark fall in retail confidence, notes MoneyWeb. Sales are feeling the impact of “moderating wage inflation, higher tax rates, rising interest rates, growing job losses and sharply lower consumer confidence”.

Mr Le Roux added that with the economy so weak, it makes it “even more vulnerable by increased uncertainty around political, economic policy and labour developments,” adds Fin24. A small setback could “actually push it over the edge,” such as a strike in the gold mining sector.

This latest economic indicator comes after the economy contracted 1.3% in the second quarter of the year.

The signs are certainly not good for the economy at the moment.

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Business confidence hits a four year low as South Africa's economy limps along
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