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Business confidence ticks upwards

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The South African Chamber of Commerce and Industry (SACCI) Business Confidence Index (BCI) for June 2012 has improved by 2,1 points from the 92,8 in May 2012, measuring 94,9 in June 2012.

A substantial annual (year-on-year) gap in the BCI of 8,4 points developed between May 2011 and May 2012, but narrowed to 7,5 points between June 2011 and June 2012.

The BCI in June 2012 was 9,3 points below the peak of 104,2 in March 2011 during the present upward phase of the business cycle that started in September 2009. In the first half of 2011, the BCI averaged 102.6 although this average weakened to 98,3 in the second half of 2011 and to 95,7 in the first half of 2012.

The alarming dip in the BCI in May 2012 was followed by notable improvements in the sub-indices in June 2012. While only two of the 13 sub-indices of the BCI were positive on a month-on-month basis in May, eight sub-indices turned positive with one remaining unchanged in June 2012. The majority of the sub-indices in both the financial and real economic divisions of the BCI were positive in June.

The annual comparisons of the sub-indices was less convincing where five of the thirteen sub-indices improved in June 2012 and one remained unchanged. The financial environment was less supportive of a positive business mood than a year ago while there were signs that the real economic environment may have consolidated.

Although the improvement in business confidence is important, the recovery of the BCI in June 2012 may still be tested given the uncertain global economic situation as well as socio-political and economic circumstances in South Africa.

According to SACCI, the need for market driven private sector fixed investment from local as well as foreign investors remains vital. Policy development and implementation should especially nurture foreign investors that have already ventured into the South African economy.

Although business confidence has strayed from its current downward trend originating in March 2012, the promotion of a domestic environment that is nurturing to the supply side of the economy could cause a more lasting directional change in business confidence.