Business Confidence Reaches 2-Year High

26 November 2020 – BUSINESS confidence in South Africa rose to two-year highs in the fourth quarter as activity returned to near prepandemic levels following the easing of Covid-19 lockdown restrictions.

The Bureau for Economic Research (BER) said yesterday that economic growth for 2021 remained “highly uncertain” in spite of business confidence rebounding significantly in this year’s fourth quarter.

The Rand Merchant Bank/BER business confidence index (BCI) rose to 40 points from 24 points in the third quarter after crashing to an all-time low of 5 points at the height of the Covid-19-induced lockdown in the second quarter.

The print was the highest reading since the second quarter of 2018, near the 44 points reached on Ramaphoria, mainly driven by retail, wholesale and new vehicle trade.

Retail confidence rocketed from 36 to 50 points in the fourth quarter, an increase that is bigger than the seasonal improvement usually linked to Black Friday and festive holiday sales.

Wholesale confidence soared to a 6-year high from 33 to 59 points in the same period, owing mainly to a sharp increase in spending on consumer goods.

New vehicle dealer confidence leapt from 16 to 41 points as sales continued to strengthen in the fourth quarter.

RMB chief economist Ettienne le Roux, however, said it was imperative that activity in sectors was linked to the supply-side of the economy catches up more strongly to help ensure that the upward trend in confidence lasts.

“Although the surge in business confidence is encouraging, it only signifies an economy that’s out of intensive care, and not out of high care,” Le Roux said.

“Indeed, while the easing of lockdown restrictions in recent months has led to a resurgence in activity, the tempo of growth in 2021 and beyond remains highly uncertain.”

Le Roux said a durable recovery came on the back of the potential rolling out of the Covid-19 vaccine, continued high prices and strong demand mineral exports, as well as the resumption of international travel.

Investec’s chief economist Annabel Bishop said many businesses would likely have experienced some improvement in trading conditions in the fourth quarter, although there will also have been some lagged effects in Q4.20 from the lockdown restrictions in Q2.20 and Q3.20, in particular the impact on employment and incomes.

Bishop said the economy was expected to continue recovering after a very sharp rebound in the third quarter, but not yet full recovery, with the recovery remaining uneven between sectors.

“Business confidence is still depressed overall, but to a much lesser extent, and is indeed higher than at any point last year, and higher than it was in the first quarter of this year pre-Covid-19,” Bishop said. Source (IOL)