Business climate index drops 5.9 points
The IJG Business Climate Index reversed in January after posting three consecutive all time highs in October, November and December. Following this reversal, the index now stands at 161.3 points, down from 167.2 in the preceding month.
“The decline was driven by a number of factors, notably a weakening Euro vis-à-vis the Rand and other currencies, falling mineral prices, and a decline in vehicle sales and building plans approved and completed”, said IJG in the monthly report.
“The Euro continued to weaken through January as divergent economic growth and recovery drove the relative attractiveness of the US and some emerging market economies over Europe, resulting in currency flows away from Europe to these jurisdictions.”
“In addition, more than six years after a similar initiative was launched in the United States, the European Central Bank in January announced a quantitative easing programme which will begin to print money during March and should drive increased inflation in the block and weaken the Euro further.”
“The metal price sub-index declined through February as the copper price slid close to 13% on the back of weakening demand for the commodity from China as growth continues to slow from historic double-digit levels.On a good note, the uranium price recovered to U$37/lb from U$35/lb in the previous month, delivering some, albeit small, respite for embattled uranium miners in the country.”
Explaining the contribution from the building sector, IJG said “Seasonal factors drove the decline in building plans approved and completed, as reduced staff and builders’ holidays saw a decline in building plans processed and construction activity through much of December and January.”
“Following expansion in the IJG Business Climate Index, the index reversed in January, driven by seasonal and global factors. Much of the recent upward trend in the index was driven by the oil price, which continued to decline through January, however at a slower rate than preceding months.
On a monthly basis, all of the monitored indices and indicators contracted, with the same being seen on a quarterly basis, excluding the consumption index, which expanded,” states the report.