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RMB - Rand Merchant Bank

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2mo

The RMB/Bureau for Economic Research (BER) Business Confidence Index 3Q2024 rose by three points to 38%. RMB’s chief economist Isaah Mhlanga says it’s encouraging to see an expectation for improved business confidence in the next quarter across all five sectors: www.rmb.co.za/u/T_CnyA #BusinessConfidenceIndex #Economy

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The RMB Business Confidence Index for the 3rd quarter of 2024 showed a marginal improvement to 38 points from 35 points previously. This simply means that just under 4 out of 10 surveyed business respondents were satisfied with prevailing business conditions. Of the 5 sub-sectors surveyed, 2 showed a decline. In those were wholesalers and building contractors. One remained unchanged, which is manufacturing at 28, implying that just under 3 out of 10 surveyed business respondents were satisfied with prevailing business conditions. Where we saw an improvement is in retailers confidence, as well as new vehicle motor dealers confidence. If we look at the new vehicle motor dealers confidence, we saw a significant improvement of 17 points to 27 it. Nonetheless, it remains the lowest confidence sector at just under 3 in 10 respondents that were surveyed that were satisfied with prevailing business conditions. What is more encouraging is the fact that across all 5 sub-sectors, the expectations for the improvement in business confidence in the next quarter is shared, which aligns with declining level of inflation, but also expectations of cuts in interest rates that we expect to begin later this month. If we just look also in terms of the release of GDP that was released yesterday, it also shows that GDP for the 2nd quarter expanded, meaning we avoided a technical recession following a contraction in economic growth in the 1st quarter. This would align with the reduction in load shedding that we saw, which means it's going to continue to add positively to economic activity going forward. Given the expectations of the respondents, we expect a pickup in business confidence to add to more investments, potentially also encouraging consumer facing sectors to build more confidence and encourage economic activity. However, we still see constraints in the logistics sector, a factor that was also quite prevalent among respondents. That logistics remain a binding constraint on their economic activity. Load shedding itself seems to become a major issue. Which means we get a relief from a supply perspective. But we remain with constraints on the logistics sector, which is something that would need to be solved before we can see a significant improvement in confidence and therefore investment.

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