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Business Index improves

The month of February saw a slight respite in the Business Climate Index. Recovering from a depressed business cycle at year end, the business climate remains fragile and somewhat without direction with the overall improvement of 3.2 index points placingthe  index value at 132.5.
According to the analysis, the fortuitous jump is not a true reflection of the trend with the 3 month moving average still declining. The report, which was compiled by Namene Kalili, Manager of Research and Competitor Intelligence at FNB, gave insight on other pertinent market indices.
The Consumption Index, which captures the trend in consumption, climbed 6.2 index points (from 96.5 to 102.7). The report states that consumer confidence was underscored by improved passenger vehicle sales which rose 27% month on month before the tax year came to an end. The Export Index improved slightly, by 2.3 index points, on the back of higher monk fish prices which increased by 53% month on month. This was the only export indicator that improved. All others were negative. Beef and mutton prices were down 12% and 8 % respectively, while metal and uranium prices were down 4.1 % Although the Investment Index inched up by 1.2 index points, businesses are not investing as much as they did last year and the improvement in February is merely statistical due to a low base effect,  a rise that follows an abnormally large drop in the Index.
The future business climate performance is anybody’s guess with the index still groping in the dark. According to Kalili, the business climate should change for the better if GDP growth goes higher than the current expectations. The business environment is subdued with an evident slowdown in credit extension numbers, the deceleration in the NSX local index, a sluggish construction industry and declines in commercial vehicle sales. The leading indicator remained flat and therefore a continuation of the becalmed business climate is expected for the next six months.

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