Business confidence has improved, but interest rate-sensitive sectors were still struggling in the third quarter (Q3) of 2023 according to the latest RMB/Bureau for Economic Research (BER) Business Confidence Index (BCI) released on Wednesday.
The index shows that confidence rose to register a level of 33 in the third quarter after falling to 27 during the second quarter of the year.
“Although higher, sentiment is still very weak.
“Indeed, the current level of the index suggests that two-thirds of respondents are dissatisfied with prevailing business conditions. The challenges posed by relatively high interest rates, the resultant strain on consumers, and social unrest meant that business activity remained constrained,” the BER said.
The Q2 survey covered 1 050 senior executives in the building, manufacturing, retail, wholesale and motor trade sectors.
Builders remain more upbeat than other respondents recording a confidence level of 41. The biggest fall in sentiment previously was among consumer-facing sectors, namely new vehicle dealers and retailers.
Both rebounded this quarter. The business confidence of retailers gained 12 index points to reach 32.
“Overall, sales remained weak while profitability improved on the back of softer purchasing price increases. Interestingly, the index measuring the rate of selling price increases also fell significantly and is now at its lowest level since Q3 of 2020,” the BER said.
However, sentiment among durable goods retailers deteriorated further.
“This trend is mimicked in the measure for growth in sales volumes, which saw a steep decline. Wholesaler confidence was up six points to 38 even though the sales volumes of consumer goods continued to struggle.
Similarly, new vehicle dealer confidence moved higher to 30 (from 23 in Q2 of 2023) despite a further deterioration in sales and orders placed,” the BER said.
“Many of the respondents’ comments related to the impact of load-shedding, but the taxi strike in the Western Cape was also mentioned frequently – and to a lesser extent the N3 truck attacks.
There is no doubt that this had a detrimental effect on the economy,” the BER said.
Second-quarter GDP growth continued to surprise on the upside, expanding by 0.6% quarter-on-quarter.
“This affirms the underlying resilience in the economy, particularly in sectors such as manufacturing where load-shedding tends to have a bigger impact on activity.
“Indeed, investment in machinery and other equipment, within which renewable investments are captured, continued to expand in the second quarter despite low business confidence. This suggests that firms are continuing to buffer themselves against the adverse effects of load-shedding,” the BER said.
“Interest-rate sensitive sectors are suffering as reflected by downbeat sales among durable goods retailers, new vehicles dealers, and to a lesser extent wholesalers of consumer goods.”