Business confidence rose in the fourth quarter of this year, Rand Merchant Bank said on Wednesday.

"Following sharp and persistent declines from a level of 85 in the third quarter of 2006 to a low of 23 three years later, the RMB/BER business confidence index rose by five points to 28 during the fourth quarter of 2009," a statement read.

This indicated that a growing ? although still small ? number of respondents rated business conditions as satisfactory.

The upturn in confidence was consistent with other leading indicators which usually preceded a recovery in economic activity. Business confidence increased in three of the five sectors covered in the survey, while declines in the remaining two were small.

Confidence rose strongest for new vehicle dealers, with the index increasing from zero at the end of last year to 19 in the third and 29 in the fourth quarter of 2009.

Wholesaler confidence almost fully reversed

The sharp declines in retailer and wholesaler confidence during the third quarter of 2009 were almost fully reversed during the fourth quarter.

"Retailer confidence rose from 35 to 44 index points, while wholesaler confidence jumped from 17 to a still low 27."

The better mood among retailers stemmed mainly from the higher confidence levels of dealers in semi-durable goods.

Building contractors' confidence gave up the one index point it had gained during the third quarter and returned to 23.

"Confidence levels improved moderately among contractors operating in the residential market while it fell among those working in commercial real estate, leaving the overall building confidence index largely unchanged."

Need to rebuild inventories

Although small, the three index point decline in manufacturing confidence to 19 came as a disappointment, the drop occurring notwithstanding the rebound in global economic growth and the associated need to rebuild inventories.

Export sales remained weak and domestic sales volumes might have recovered even more were it not for competition from a pickup in cheaper imports.

The percentage of manufacturers seeing the political climate as constraining business activity increased from 40 to 51 percent, the highest percentage since the elections.

Also pleasing was that business confidence during this cycle did not fall to the same low level seen during previous economic downturns, and this despite what had been a severe recession that technically lasted nine months until the end of June 2009.

The fourth quarter upturn in confidence, coupled with respondents' expectations of more advances in the new year, was consistent with a further improvement in business conditions.

The fourth quarter survey was conducted between 16 October and 13 November.