Recent economic data releases appear to point in different directions. The day after a positive report on last month’s manufacturing activity came news of falling business confidence.
An index compiled by the SA Chamber of Commerce and Industry (Sacci) showed a decline from 90.7 in July to 90.5 last month – 10 points below the average of 100 for the base year of 2010.
And the RMB/BER business confidence index fell 6 points to 42, “which indicates that close to three-fifths of the respondents rated prevailing business conditions as unsatisfactory”, according to Etienne le Roux, the chief economist at Rand Merchant Bank.
On Monday, publication of the Kagiso purchasing managers’ index (PMI) showed a rise of 4.3 points to 56.5, implying expansion in manufacturing.
Explaining the discrepancy between the Sacci index and the PMI, Sacci economist Richard Downing noted that the PMI focused on manufacturing while the Sacci index covered the whole economy.
Le Roux made a similar point, saying the RMB/BER survey showed a 3 point improvement in manufacturing confidence and an 8 point improvement in the retail sector.
But he said the headline figure had been dragged down by sharp declines elsewhere. “Declines were particularly sharp in the case of new motor dealers and wholesalers.”
New motor dealer confidence dropped from 61 index points in the second quarter to 39 in the third, mainly due to a sharp slowdown in sales, according to the report.
“Till now, a shift to smaller, lower-priced vehicles combined with generous wage increases and easy credit for people with secure jobs sustained relatively strong growth in new car sales.
“But sales slowed as these beneficial factors ebbed.”
Wholesaler confidence fell from 61 to 43 points, mainly due to slower growth in profits.
“This is difficult to square with sales volumes that slowed only moderately in the third quarter,” the RMB/BER report said. “Such discrepancies have occurred in the past, only to improve again in subsequent quarters… we caution against reading too much into this quarter’s sharp decline in wholesalers’ confidence.”