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The composite SACCI BCI was 106.9 in May 2023. It increased by 1.9 index points in June but decreased by 1.5 index points in July 2023 to reach 107.3. It peaked at 117.3 in December 2022 but declined due to electricity supply shortages, the impact on economic activity, and conflicts in Ukraine affecting commodity prices. Since April 2023, it has stabilised around 107.
The BCI in July 2023 was three index points lower than in July 2022. However, the average BCI during the first seven months of 2023 was still 0.7 index points higher than the corresponding period in 2022. Despite being at lower levels, the BCI showed signs of stabilization.
In the medium-term (year-on-year), business confidence decreased by 3 index points compared to the previous year. Positive contributions were observed from increased inward tourism numbers, higher merchandise import volumes (especially diesel fuel), more new vehicle sales, and higher share prices. However, negative impacts on the BCI in July 2023 were seen from lower merchandise export volumes, higher real financing costs (resulting from lower inflation), a weakening rand against major trading currencies due to unpredictability, and a decrease in the real value of building plans passed.
Business confidence in South Africa is being influenced by various economic factors. The IMF's updated outlook indicates a decline in global economic growth from 3.5% in 2022 to 3.0% in 2023 and 2024. South Africa's growth is expected to be modest, with a slight positive growth in 2023 and a projected growth of around 1.5% in 2024, as per the IMF. The SA Reserve Bank's forecast aligns with this, estimating growth at 0.4% in 2023, 1% in 2024, and 1.7%.
South Africa's headline inflation (CPI) fell below the SA Reserve Bank's upper target range of 6%, prompting the Reserve Bank to maintain the repo rate at its recent MPC meeting. Producer inflation (PPI) also decreased to 4.8%, and intermediary output prices rose by only 2.4% year on year, indicating a potential easing of the inflationary process. As a result, a modest interest rate policy may persist.
The SACCI BCI has remained stagnant over the past four months, suggesting an unencouraging business climate for economic activity. This environment hinders improved longer-term prospects for the economy, resulting in limited fixed investment and inadequate conditions for robust economic growth and job creation. Additionally, the global economic environment is not currently favourable for South Africa as an open economy and investment destination, making it challenging to attract much-needed foreign capital and investment.
Issued by SACCI
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