Crime, inflation dent confidence
Johannesburg - The South African Chamber of Business (Sacob's) Business Confidence Index (BCI) fell below the favourable 100 level in June for the first time this year, knocked by high crude prices and a weaker rand.
"The SACOB Business Confidence Index (BCI) declined by two index points to 99.4 from 101.4 in May 2006 and it is the first time in 2006 that the BCI dropped below the favourable level of 100," Sacob said in a statement on Tuesday.
Sacob pointed to a weakening of the rand currency during the month - partly a result of emerging market turmoil - and high oil prices which combined to stoke inflation worries.
The most recent data for consumer price inflation shows it is still well within the government's 3% to 6% target range but its pace is quickening.
The central bank also unexpectedly raised its key lending rate last month by 50 basis points to 7.5% in a preemptive move against price pressures.
"I would say high crude oil price is a big concern," said Sacob economist Richard Downing.
Sacob also highlighted jitters about the country's yawning current account deficit, which swelled to 6.4% of gross domestic product (GDP), its worst level since 1982, in the first quarter from 4.5% in the previous quarter.
"Sacob is convinced that South Africa has become more aware of the risks associated with a large and unsustainable current account deficit," it said.
"Sacob believes that such current account exposure should not be allowed to develop to a point where a need for drastic action arises," it added.
It also pointed to concerns about crime after a wave of high-profile incidents including a shoot-out in which 8 alleged robbers and 4 policemen died.
"The recent spate of violent criminal attacks has raised the profile of the overall threat to safety and security. They are concerns that pervade both business and public sentiment," it said.
News Source: www.news24.co.za
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