The South African Chamber of Commerce and Industry (SACCI) Business Confidence Index (BCI) increased by 1.3 index points to 83.1 in June 2009 and is 4.2 points higher than the low of 78.9 recorded in March 2009.

The BCI had a positive leaning since April 2009 and improved from an average of 81.9 for the first quarter 2009 to an average of 82.3 for second quarter 2009.

“The latest economic data and financial market movements indicate that the business climate has been stabilizing but that businesses and consumers remain uncertain and hesitant. Although still broadly depressed, a number of economic indicators suggest that the decline of the economy has have bottomed out and that some economic activities may even have turned. However the pace of recovery remains tentative and still fragile,” said SACCI.

The slowdown in the volumes of imported merchandise goods and the increase in the volumes of merchandise goods exported between January 2009 and May 2009 suggest lessening pressure on the current account deficit. Notwithstanding the positive trend since the beginning of the year, export volumes are still about 30% down on the high export levels reached in September/October 2008.

Although producer inflation (PPI) declined significantly, the decline was dominated by fuel and base metal related prices that usually take some time to contribute to lower consumer prices and lower consumer inflation. The recently approved price increase for electricity comes on top of a substantial increase in electricity prices up to May 2009.

“This will no doubt contribute to higher inflationary expectations and risks,” said the SACCI economists.

Domestic and foreign demand for South African goods and services is strained and this has negative consequences for the supply side factors of production, namely labour, capital and operating overheads.

“Caution and restraint is required in charting an economic policy path through the economic woes that threaten South Africa. The fragility that underpins the promise of stability makes it vulnerable to suffocation if not supported by the appropriate economic policies,” concluded SACCI.

Sapa

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