Positive leading index signals better business climate
The IJG Business Climate Index dropped 0.9 index points in February 2014 and now stands at 147.9 points. Despite the marginal decline, business sentiment remains positive. The decline was as a result of slight downward moves in the fish, meat and oil price indices. Rising inflation in February also contributed to the overall decline in the index.
The vehicle sales index was the most significant of the positive sub-components of the overall index and expanded 36.1 points. This can be attributed to record vehicle sales for the month of February according to a statement released by the Institute for Public Policy Research (IPPR). The IJG Business Climate Index is compiled by the IPPR.
Building plans and private sector extension continued to increase more or less in line with nominal growth, marginally above inflation levels in the country. Credit extension is expected to slow should an interest hike cycle start. A contraction in the number of building plans completed and a decline in vehicle sales is expected to follow through as a result, the statement said.
The statement said the consumption and export indices also declined between January and February while the investment index expanded by 3.5 points. “A sizeable increase in the leading indicator, which extended by 36 points to 224 points in February, could signal an improvement in the business climate over the coming months, in line with the current growth outlook for the country.” The IJG Business Climate remained flat in February, albeit at an elevated level following strong growth throughout much of 2013. The leading indicator has turned extremely positive, suggesting a strong and improving business climate going forward, the statement concluded.