Recession blues bite Bay business outlook

THE Nelson Mandela Bay metro‘s Business Confidence Index continued to decline in January “under recessionary economic conditions and low levels of both business and consumer confidence”.

The decline came amid the economy contracting by -1,8 percent in the fourth quarter of last year, the first annual retail sales decline in nine years, and a 22% plunge in manufacturing output.

The index, compiled for the regional business chamber, tracks the performance of 15 key economic indicators chosen from those available that are believed to “best reflect the business mood in the PE/Uitenhage area”.

These include the inflation rate as measured by the Consumer Price Index for the metro; the prime rate at month end; the rand-dollar exchange rate; retail sales in the Eastern Cape; the total number of new cars sold in the metro; the value of building plans passed and completed; the Consumer Confidence Index for the metro by the Bureau for Economic Research of Stellenbosch University, and number of passengers arriving at the PE airport.

But Dr Neil Bruton, compiler of the index, says current developments “will ultimately yield a consolidation in the rate at which the index is declining at present”.

“The inflation rate is set to decline rapidly in 2009 and … interest rates are set to decline, probably steeply. Furthermore, households and businesses are addressing their debt positions, with growth in credit extension to the private sector down to 11,9% in January, the lowest since November 2004, and with growth in demand for mortgage finance falling to the lowest level since mid-2003.”

The indicators that supported the index through January included significant declines in the trend cycles of the metro inflation and prime interest rates; continued growth in the real value of buildings completed and steady growth in value of those passed; and marginal growth in the trend cycle of retail sales.

Negative indicators included the “steep decline” in new cars sold and the “declining” number of airport passenger arrivals.

“The level of consumer confidence in the Eastern Cape, while reflecting a generally declining trend, remained unchanged.”

source: The Weekend Post

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