Investor confidence spurs business index to year high
The Investment index moved up by 22.9 basis points to lift the IJG Business Climate Index to a yearly high of 131 basis points in July.
Investor confidence was boosted by a surge in construction activity, resulting in a 70% month-on-month increase in building plans completed comprising mainly commercial property developments in Windhoek’s Prosperita area. The effects of this construction boom are expected to filter through the index over the next three months.
Commercial vehicle sales increased by 21% but, as with building plans, these sales did not have much impact on credit extension numbers. The producers of the index believe that increases in both commercial property construction and vehicle purchases were financed from owners’ funds.
But while the investment index showed a big jump from June, the export index, like other indices, remained unchanged after reaching a three-year low last month. Exporters have been affected by falling metal prices on the back of weakening Chinese demand for base metals, and most international manufacturing data suggests a slowdown in global manufacturing activities. Therefore the export outlook remains gloomy.
The local leading indicator moved sideways because the number of building plans passed went down – indicating reduced business confidence in about six months’ time. Consumers were less confident in July and bought fewer cars, thereby decelerating instalment credit growth.
The index also shows that food and housing inflation remains high and the accelerating international cereal prices are likely to affect the local economy early next year.