World Cup boost for business confidence

9 July 2010

The Business Consumer Index (BCI) rose by 2.8 index points to 84.8 points in June, says the South African Chamber of Commerce and Industry (Sacci).

In May, when the index stood at 82, only four sub-indices were positive and this improved to six sub-indices in June with three sub-indices being neutral. Since March this year the BCI has exceeded the level of the corresponding month in 2009.

Harnessing momentum

“The 2010 Fifa World Cup™ tournament raised positive sentiment domestically and internationally. The success of the tournament could boost domestic business confidence despite indications that the global economy may suffer a depressed economic outlook for the medium term,” said the Chamber.

It further added that if the momentum provided by the tournament which draws to an end this week is appropriately harnessed and directed, then longer term economic benefits could be realised.

“The thrust must be channelled in the direction of economic success and a business environment that augments and enhances business confidence.”

Global recovery ‘fragile’

The Chamber also raised caution about the direction in which world economies are headed, even with the global recovery appearing to be under way. It said that though the global recovery appeared to be under way, it remained fragile.

In addition, the fiscal policy adjustments in Britain and the Eurozone caused distress.

Sacci also noted the deterioration in the current account of the balance of payments in the first quarter 2010.

“Exports declined and imports increased at a stage in the business cycle where it should not happen. It is now accepted that rand strength may have contributed to this situation,” it said.

Job losses

Job losses, Sacci said, were a concern. In the first quarter of 2010, 79 000 people lost their jobs and indications are that jobs are going to continue being shed in the second quarter of 2010.

“These job losses occurred against wage rate increases more than double the inflation rate. With administered prices increasing by more than inflation, a wage rate more than double inflation and the weakening exchange rate, higher inflation can be expected in the medium term,” said Sacci.

Source: BuaNews