Bloomberg News

South Africa Business Confidence Plunges to 1-Year Low, RMB Says

September 06, 2011

Sept. 6 (Bloomberg) -- South African business confidence fell to the lowest level in a year in the third quarter because of weak demand in manufacturing, threatening the recovery in Africa’s biggest economy, Rand Merchant Bank said.

The RMB/BER index decreased to 39 from 48 in the second quarter, the investment bank, a unit of Johannesburg-based FirstRand Ltd., said in an e-mailed statement today. A reading below 50 indicates more companies are pessimistic than are optimistic about prevailing business conditions.

“The drop in confidence, as well as the weaker underlying developments in all the sectors, except for retail trade, do suggest that the upturn has lost some steam,” RMB said. “Real gross domestic product growth in all likelihood remained weak in the third quarter.”

Economic growth slowed to an annualized 1.3 percent in the second quarter from 4.5 percent in the previous months as manufacturing and mining output contracted, the statistics office said on Aug. 30. Growth in manufacturing, which makes up 15 percent of the economy, has remained at or below 1 percent for three consecutive months as a debt crisis in Europe cuts demand for South African exports.

The confidence index for manufacturers slumped to 36 in the third quarter from 51 in the previous three months, while the index for wholesalers dropped to 31 from 47, RMB said. The motor trade index declined 18 points to 58 because of a shortage of vehicle-component imports from Japan and rising household-debt levels, the bank said.

The confidence index for retailers was little changed at 48 in the third quarter from 47 in the previous three months, the statement said.

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

--Editors: Nasreen Seria, Gordon Bell

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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