Business climate reverses gains as oil bounces back

The IJG Business Climate Index turned sharply downward in April as an oil price bounce combined with deterioration in a number of the index’s indicators, started to impact the monthly index. The Institute of Public Policy Research (IPPR) said, the index now stands at 153.8 points, down by 15.5 from 169.3 points in the preceding month.

“As well as the jump in the oil price in April, from U$57/barrel to U$67/barrel, notable declines were seen across various indicators. Company registrations declined to 1895 from 2167 a month earlier. The value of building plans completed halved from N$40 million in March to N$20 million in April, while building plans approved fell from N$195 million to N$110 million. Vehicle sales also saw a notable decline, falling from 2150 units in March to 1742 in April” stated the report. “The oil price recovered after its 50% fall between June 2014 and January 2015. However, it remains heavily depressed when compared to a year ago. Year-on-year, the price at the end of April was down 37%. “With Namibia being a net importer of oil and fuel, this general downward trend is a positive for the index in the long term, but the recent rebound in the price is a short-term negative. Through May and into June, the price fell once again, returning to levels below U$60 per barrel. The decline in building plans approved and completed as well as the decline in vehicle sales appear to be a once-off development. The magnitude of the index’s reaction to these declines speaks to the strong base that has been created for these categories over recent months. “In addition, building plans as well as businesses registered tend to be highly cyclical and volatile. On the positive side, metal prices moved in favour of producers, with both copper and zinc recovering in comparison to the preceding month. The copper price increased from U$6065/t to U$6365/t while the zinc price increased from U$2072/t to U$2367/t”, said the IPPR. The report also states that the uranium price contracted slightly from U$39.5/lb to U$37/lb and that while the decline in the index was aggressive, it was caused by a number of indicators moving away from long-term levels and trends, and as such is expected to be short-lived. All of the broad indices and indicators monitored contracted during the month with the exception of the export index, which improved marginally.