The SACCI Business Confidence Index plummeted by 5.7 index points to 84.2 in October 2008 from 89.9 in September 2008.

According to the SA Chamber of Commerce and Industry, this was the largest month-on-month decline since July 1990 when the BCI declined by 7.9 points.

The decline of the BCI in October 2008 was also the largest month-to-month change in 2008.

"The BCI was pushed back to the level that prevailed before interest rates started to fall in June 2003 — a development which took business confidence to a new plateau in the second half of 2004," SACCI said.

The BCI is a composite weighted index of thirteen sub-indices.

Nine sub-indices of the SACCI BCI had a negative impact on the BCI's movement in October 2008 and four of the sub-indices made positive contributions, SACCI said.

"The key contributor to the current state of business confidence is the performance of the global economy and the consequences experienced in South African financial markets.

"SACCI is of the opinion that the current economic crisis was perhaps rooted less in ideology than in aspects of real financial instruments.

The Chamber said that proper regulations and supervision of fair lending practices could ensure sustainable high levels of confidence in the financial system.

It added that there were signs that the US and Europe were already experiencing recessionary developments and that the knock-on effect would reach other parts of the world in the final months of 2008 and will prevail through much of 2009.

"Business confidence could accordingly remain under strain," SACCI said.

The Business Confidence Index is generated monthly by SACCI as a measure of the level of business confidence within the South African economy.

It is a market-related index that reflects not what business is saying, but what it is doing and experiencing.

It is therefore not an opinion / perception-based index.

Sapa