According to a report from the Institute of Public Policy Research (IPPR), the IJG Business Climate Index continued to recover in June following the uptick seen in May but failed to regain previous highs. After these two consecutive up months, the index now stands at a level of 161.5 points, up 7.7 points from the April low.
The index recovery in June was driven by a number of factors, most notably a continuation in the slide in oil prices, a pick-up in vehicle sales, increases in company registrations and a spike in lamb prices.
“Following some stabilisation in the oil price after its collapse between mid 2014 and early 2015, the commodity’s price started to slide once again in June, with Brent crude closing the month at U$64 per barrel, the lowest level in three months. This slide continued through July, closing the month at U$51.66, the lowest month-end close since 2009. Vehicle sales recovered somewhat in July, up to 1,845 vehicles sold, from 1603 in the preceding month”, said the IPPR.
However, while sales have picked up they remain well below their peak levels of late 2014 and early 2015. Lamb prices spiked up 12.5 % through the month, likely on the back of supply shortages in the country. Company registrations saw the second highest level on record in June, with 2,263 companies being registered during the month, compared to 1,579 registrations in the previous month. Company registrations tend to be fairly cyclical, and are often driven by the government budget and local available tenders. On the negative side, the building plans index turned down again in June. This was driven by a N$200 million drop in building plans approved, and a N$50 million decline in building plans completed.
In all, the index and its high frequency indicators are pointing to an economy that is starting to top-out from a growth perspective. This is to be expected after many years of strong growth, and this general growth slow-down is driven by both the consumption and investment components of GDP as illustrated by the key indicators.
On a monthly basis, both the investment and consumption indices expanded. However, both were down on a quarterly basis. Exports remained favourable both on a quarterly and monthly basis, while the leading indicator has turned negative on both counts. Overall, the business climate is less favourable in Q2 2015 than it was in Q1.