Bloomberg News

South African Business Confidence Drops Most in a Year on Prices

June 07, 2011

June 7 (Bloomberg) -- South African business confidence fell the most in a year in the second quarter as rising food and fuel prices curbed consumer spending, Rand Merchant Bank said.

The RMB/BER index decreased to 48 from a three-year-high of 55 in the first quarter, the investment bank, a unit of Johannesburg-based FirstRand Ltd., said in an e-mailed statement today. A reading above 50 indicates more companies are optimistic than are pessimistic about prevailing business conditions, the bank said.

“Lower confidence in the trade sectors can mainly be attributed to some weakening in households’ ability to spend,” RMB said. “Rising energy costs and higher food prices are fueling consumer price inflation. As a result, real growth in compensation is being squeezed.”

While the recovery in Africa’s biggest economy has strengthened, with growth accelerating to an annualized 4.8 percent in the first quarter, vehicle sales rose the least in 17 months in May, an industry group said on June 2. The purchasing managers’ index eased for the third consecutive month in May, Kagiso Securities Ltd. said on June 1. Inflation accelerated to 4.2 percent in April, according to the country’s statistics office.

The confidence index for retailers slipped to 47 in the second quarter from 58, while the index for wholesalers dropped to 47 from 65, RMB said. The motor trade index declined to 76 from 84, it said.

The business confidence index is compiled by RMB and the University of Stellenbosch’s Bureau for Economic Research.

--Editors: Gordon Bell, Nasreen Seria

To contact the reporter on this story: Franz Wild in Johannesburg at fwild@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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