Business confidence dips to lowest in 20 years

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The Bureau of Economic Research released the Business Confidence Index (BCI) for third quarter of 2019. The index plummeted to a 20 year low of 21 index points. 

The BCI remained unchanged between the first and second quarter of 2019, before weakening in the third quarter. The BCI has trailed below the 50 neutral mark (a value above 50 signals optimism and pessimism is indicated when the value dips below 50) for the 19th consecutive quarter.

Further collapse in business confidence

There was a deterioration  in four of the five sub-indices, whereas three of the sub-indices had improved in the second quarter of 2019. All these sub-indices remained below their historic median in the third quarter of 2019.

Below are highlights from the Macro Research team on BCI for the third quarter of 2019:

  • The BCI for the third quarter of 2019 plummeted to a 20-year low of 21 index points from 28 index points in the second quarter of 2019.
  • There was a deterioration in four of the five sub-indices, whereas three of the sub-indices had improved in the second quarter of 2019. All the sub-indices remained significantly below their historic median in the third quarter of 2019.
  • The new vehicle dealers’ sub-index was the only sub-index that improved y 5 index points to 22 index points in the third quarter of 2019, but sentiment in this sector remains depressed.
  • The manufacturing sector sub-index also nosedived to 16 index points, which are levels last seen in the second quarter of 1999. The latest print was only two index points shy from the lowest level reported in the third quarter in 1985. Eleven index points was shaved off the retails sector sub-index in the third quarter of 2019, from 28 index points in the second quarter of 2019.
  • The 25 basis point repo rate cut in July 2019 failed to invigorate optimism in the business environment, suggesting elevated political uncertainty and demand concerns are weighing more negatively on corporates.
  • Weak business confidence is unlikely to turn the corner soon, unless significant reforms are implemented.

Read full report | HERE |


Herman van Papendorp | Head of Investment Research & Asset Allocation | 

Sanisha Packirisamy | Economist | 

 

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