Fall in car sales reflects a sharp drop in confidence
The March decline was the sharpest month-on-month decrease since the 2.9 index points of the BCI last August, Sacci said yesterday.
This followed an uptick of 0.5 index points in February. The BCI of March was 1.9 index points lower than the 91.8 of March 2019, it said.
“The economic effect of Covid-19 on trading partners - and lately on the South African economy - became more evident and pronounced towards the end of March 2020. Except for new vehicle sales and energy supply, the effect of Covid-19 was not yet reflected in the available data for the real economy,” Sacci said.
It said the credit downgrade to junk status by Moody’s last month did not have a profound effect on the March BCI, as it came at the tail end of March.
Sacci said exceptionally negative monthly impacts on the BCI came from the lower number of new vehicle sales, the weaker exchange rate of the rand against the major trading currencies, and lower share prices - all mainly due to global uncertainty and unpredictability caused by Covid-19.
In March, the South African Reserve Bank slashed the repo rate by 1 percentage point to 5.25 percent.
However, lower interest rates, improved terms of trade, and the decline in the US-dollar crude oil price somewhat comforted a nervous business community, it said.
Sacci said the long-term effects of South Africa’s lockdown were not clear, but “all efforts should be put in place not to create fear and panic and to put sound economic policy in place to ensure sustainable economic performance beyond Covid-19, and the effects of the lockdown”.
Sacci said much could be learnt from other countries on efforts made to cope with the short-term effects of Covid-19, but South Africa must not neglect efforts to re-establish business and investor confidence after the distractions of Covid-19 have subsided.
“Although some of the effects of the Moody’s downgrade of South Africa’s sovereign credit rating to Ba1 have been factored in by financial markets, the outlook remains negative. Covid-19 will make it difficult to attend to structural economic matters,” it said.