Mariam Isa
5 June 2009
Johannesburg — Emerging trends suggested there were "improved prospects" for the global economy, but the blow to factory output was a threat to investment and jobs, it warned.
The chamber's business confidence index (BCI) slipped to 81,8 last month from 81,9 in April, pressured by a 47% rise in company failures in the first four months of this year, receding trade flows and falling retail sales. The global recession was "causing adjustments in the economy that could result in structural difficulties over the longer term", it warned.
"Noticeably, the decline in manufacturing output could hold serious consequences for investment and jobs in the future."
The manufacturing sector, the economy's second-biggest, shrank by a record 22% in the first quarter, helping to tip the economy into its first recession in 17 years.
The slump in factory production was in line with global trends, but news that the economy contracted 6,4% compared with the final quarter of last year took analysts by surprise. A Reuters poll yesterday showed that consensus forecasts for the depth of contraction in the economy this year were revised sharply down to 1,4% from 0,6% last month.
"There is no clear indication that the economy is on the road to recovery ... at this stage," the chamber said. It believed that the recovery in business confidence would be a laboured process rather than a sudden turnaround.
The BCI peaked at 103,5 in December 2006 and hit a low of 78,9 in March this year.
Fitch rating agency sent a similar message yesterday, saying that SA's corporate ratings were likely to be "further affected" this year due to challenging market conditions in its main trading partners.
"Fitch does not believe that the economic downturn will abate in the short term; a sustained market recovery is only expected towards the end of 2010," said Roelof Steenekamp, associate director in Fitch's corporate team for SA.
The economy is doing better than many of its global counterparts because of the government's plans to spend R787bn on infrastructure over a three-year period.
But official data shows that the overall pace of investment is slowing, rising by just 3% in the final quarter of last year from 7,3% in the previous quarter.
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