Business confidence dips the lowest in 20 years

Sanisha Packirisamy, Economist at Momentum Investments

Herman van Papendorp, Head of Investment Research & Asset Allocation at Momentum Investments

HIGHLIGHTS

• The Business Confidence Index (BCI) for the third quarter of 2019 plummeted to a 20-year low of 21 index points from 28 index points in the second quarter of 2019.
• There was a detoriation in four of the five sub-indices, whereas three of the sub-indices had improved in the second quarter of 2019. All the sub-indices remained significantly below their historic median in the third quarter of 2019.
• The new vehicle dealers’ sub-index was the only sub-index that improved y 5 index points to 22 index points in the third quarter of 2019, but sentiment in this sector remains depressed.
• The manufacturing sector sub-index also nosedived to 16 index points, which are levels last seen in the second quarter of 1999. The latest print was only two index points shy from the lowest level reported in the third quarter in 1985. Eleven index points was shaved off the retails sector sub-index in the third quarter of 2019, from 28 index points in the second quarter of 2019.
• The 25 basis point repo rate cut in July 2019 failed to invigorate optimism in the business environment, suggesting elevated political uncertainty and demand concerns are weighing more negatively on corporates.
• Weak business confidence is unlikely to turn the corner soon, unless significant reforms are implemented.

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