Business climate remains positive despite risks

The IJG Business Climate Index edged upwards in October as it gained a further 0.7 basis points. The investment index was the biggest mover, gaining 5.4 basis points as total company registrations soared to 1 339 new entities registered in October, while the NSX local index continued its impressive run of form to end the month at 219 basis points.
Commercial vehicle sales accelerated 6% to 680 units. The consumption index was also on the front foot through October, gaining 2.1 basis points to end the month at 103 basis points. The consumption index was stimulated by improved consumer credit extension numbers, which have not really impressed since the interest rate cuts in late 2008.
The big driver behind credit extension was instalment credit sales, as passenger vehicle sales soared 11% during the month. Inflation did however creep beyond the 3 to 6% target range for the first time since February 2010. The leading indicator fell 2.5 basis points due to increasing international fuel prices and very weak metal futures prices.
Overall metal prices fell 25% during the month on both spot and futures markets. The net result was that the export index fell 3.5 basis points, purely on the back of weak metal prices. Fish prices managed to cushion the export index as prices were up 8% and meat prices moved sideways ahead of expected increased demand before the festive season.
Despite a fifth consecutive month of growth, the IJG Business Climate Index is looking shakier with the export index, leading and coincident indicators being the first to show signs of buckling. As a result the Index’s upward trend may be levelling off.