The RMB/BER Business Confidence Index (BCI) rose by six index point during the third quarter but this is said to be only coming to partially neutralises the big fall experienced during the second quarter.
The BCI rose by six points from 41 in the second quarter to 47 in the third quarter of 2012. The index had dropped by 11 points during the second quarter from 52 in the first quarter.
The BCI statement released yesterday said “While it is encouraging that the RMB/BER BCI did not extend its second quarter decline, the improvement in sentiment during the third quarter was small, with most of the respondents still downbeat about prevailing business conditions”.
The statement said this is reflective of underlying economic activity remaining weak. “To be sure, when the sharp (but temporary) rebound in mining output is excluded from the second quarter GDP number released last week, growth moderated to an annualised rate of only 1.9%. The latest RMB/BER survey results point to the economy (excluding mining) in all likelihood not having fared much better, if at all, during the third quarter”.
The RMB/BER BCI indicates the average percentage of senior executives in five sectors of the economy (building, manufacturing, retail, wholesale and motor trade) rating prevailing business conditions as satisfactory. The index varies between a minimum of zero and a maximum of 100. The current reading of 47 therefore indicates that a small majority of senior management is negative at present.
In a statement released yesterday it was said that “Although business confidence increased in all the sectors surveyed, wholesale was the only sector where sentiment continued improving in the third quarter. In the remaining four sectors, the recovery in confidence either more than fully compensated for the deterioration during the second quarter, or did so only to a degree.
After edging up by two points to 50 in the second quarter, wholesale confidence increased by a further three points to 53 in the third. Sales volumes of non-consumer goods (machinery, equipment, building material, chemicals and metals) as well as consumer goods (agricultural products, food, clothing etc) continued to fare well.
New vehicle dealers not only registered the biggest improvement in sentiment, but it was also the only sector in which confidence rose by more in the third quarter than it had declined in the second. The index jumped by 14 points from 65 in the second quarter to an 18-month high of 79. Better sales in the third quarter buoyed motor dealers.
In the remaining three sectors, the third quarter recovery in confidence was insufficient to make up for the big fall in the second quarter.
After dropping by seven index points to 24 in the second quarter, building confidence increased by just two points in the third. Although at an index level of 26 the mood among building contractors remains low relative to the other sectors, the slight improvement is reflective of underlying conditions improving, albeit not strongly. In the third quarter, building activity not only picked up relative to the second quarter, but the rate of contraction was also lower compared to the same period a year before.
Retail confidence fell by 22 index points to 39 in the second quarter, but only recovered by four. While retail sales volumes improved in the third quarter of 2012, the growth was less robust compared to the second half of 2011. Sales of non-durable goods (food, beverages and pharmaceuticals) were a drag, while sales of semi-durable (and to a lesser extent durable goods), continued to do well.
Similar to the building and retail sectors, the four index point improvement in manufacturing confidence (to a level of 33), only partially compensated for the 18 point decline in the second quarter. The growth in manufacturing production slackened in the third quarter relative to the second, but remained positive. Weaker domestic sales and a drawdown of inventories trimmed the growth in production.