Business sentiments remain bleak

ALTHOUGH business confidence in the second quarter remained low with all the indicators of the IJG Business Climate Index in the red, the Institute of Public Policy Research (IPPR) of recovery towards the year-end.

The IJG Business Climate Index remained unchanged in May at 118,4.’The sideways movement in the overall index suggests that the index is at the tail end of its downward cycle, with leading indicators hinting towards eventual recovery in the third or fourth quarters,’ the IPPR said.Consumers were slightly more confident during the month as the Consumption Index gained 4,2 basis points, but still remains somewhat subdued at 95,5 basis points. Consumer sentiments were lifted by low inflation figures, improved passenger vehicle sales and favourable international fuel prices. ‘Although it is still early days, credit extension to individuals has begun to increase, thus prompting the Bank of Namibia (BoN) to maintain interest rates at the current level. Early indications point towards an interest rate decrease towards the end of the third quarter,’ the IPPR said. The Investment Index fell 2,3 basis points as commercial vehicle sales fell by 42 units from 479 units in April to 437 units in May. With the construction industry still on the back foot, a mere N$52 million worth of construction work was completed in May as opposed to N$97 million a year ago. ‘Available data suggests that this trend will continue at least for the next two months,’ according to the IPPR. The Export Index faired a bit better – but was still in the red – shedding 1,3 basis points, mainly due to the stronger local currency against the euro and weaker commodity prices.Metal prices were down eight per cent on average, but local currency weakness against the US dollar translated into a slightly smaller decline of five per cent in local currency. Uranium prices remain depressed due to high military and commercial inventories, but the local currency weakness against the US dollar ensured some revenue improvement for uranium exports. The stronger local currency against the Euro dampened beef prices, which fell four per cent month-on-month, although lamb prices firmed on the back of higher demand in South African markets. The leading indicator moved upwards by 11,6 basis points in tandem with international leading indicators due to 15 per cent lower Brent futures prices along with increased credit extension to the business sector, increased company registrations and a higher local index of the Namibian Stock Exchange.