After falling from 50 to 43 during the third quarter, the Rand Merchant Bank /Bureau for Economic Research (RMB/BER) Business Confidence Index (BCI) remained unchanged during the fourth quarter and this outcome could have been better were it not for a variety of special factors that kept sentiment subdued.
The fourth quarter survey took place during the first two weeks of November 2021 (27th of October to 15th November), covering 1 300 senior executives in the building, manufacturing, retail, wholesale, and motor trade sectors.
Third wave Covid-19 infections, the unrest across KwaZulu-Natal and Gauteng, transport delays, shortages of inputs and insufficient stock all hit confidence hard during the third quarter. Although the impact of some of these ‘shocks’ has faded, new ones including the Numsa strike and load-shedding emerged, which prevented sentiment from recovering during the fourth quarter. Added to this, existing supply chain disruptions and stock shortages have intensified. Excluding building contractors, confidence declined in all the remaining sectors.
Building confidence jumped from 18 to a still-low 30 points during the fourth quarter. After lagging the residential sector since the onset of the pandemic, confidence in the commercial property sector bounced back noticeably to surpass the BCI of the residential sector. While improved sentiment among smaller contractors in KwaZulu-Natal stood out yet, it is uncertain how long the improvement in overall building confidence will last; the commercial property market continues to suffer from oversupply while the boost from unrest-related re-building will likely prove temporary.
Retail confidence declined marginally from 56 to 52 with wholesale confidence from 55 to 53 – the only two sectors where confidence has exceeded the neutral 50-mark and where indices are significantly above long-term averages. Sector rotation within retail trade continued with sales of non-durable goods subsiding, while those of semi-durable and durable goods picked up. Black Friday and festive season sales could amplify this trend if stock levels improve. Manufacturing confidence declined from 41 to 38 with sales improving noticeably after the third quarter disruptions but a string of factors dampened confidence; a struggle to source enough crucial inputs timeously, production disruptions due to the NUMSA strike and load-shedding, to escalating cost increases owing to higher prices of raw materials, increased transport costs and additional expenses related to load-shedding.
New vehicle trade confidence sagged further from 47 to 41, mainly as new vehicle dealers suffered from insufficient stocks. This curbed the number of units sold.
“Thanks to a slight improvement in the composite activity indicator also derived from the survey results, confidence could easily have increased in the fourth quarter. It is a pity that various unfavourable external as well as domestic shocks prevented this from happening. However, the likelihood that supply chain disruptions, insufficient stock, load-shedding, and escalating cost increases may prevail for a while longer, dimming the hopes of a further strong recovery in the RMB/BER BCI any time soon”, commented Ettienne Le Roux, chief economist at RMB.