Lacklustre consumers dent business confidence

WARY and financially weary consumers hijacked local business confidence in November, the latest IJG Business Climate Index showed.
The index shed 2,3 basis points, ending the month at 122,4.

All the sub-indices – investment, consumption, export, as well as the leading and coincident indicators – were in the red.’While there are signs of improved business sentiment over the longer term, more immediately a lack of consumer confidence is hurting the index,’ the Institute for Public Policy Research (IPPR) said releasing the figures. ‘However, during 2009 the index has risen by 7,5 per cent and therefore the three-month moving average is still on an upward path,’ they said.Looking at the individual sub-indices, the IPPR said although ‘recessionary pressure continued to abate internationally’, the Investment Index shed 9,5 points. It ended November at 156,3.Commercial vehicle sales fell by 241 units or 31 per cent month-on-month, driving down the Investment Index.The Export Index was down 2,5 basis points as the strength of the rand continued to plague exporters, the IPPR said. To this end, the rand gained 5,4 per cent on the US dollar and 3,3 per cent on the euro. Although international metal prices were up one per cent to four per cent, export revenues were eroded by 2,2 per cent due to the sheer strength of the rand, the think tank said. Meat prices were up 0,8 per cent, while fish prices remained flat. The Consumption Index remained in negative territory despite the strong rand, which effectively diluted the effects of rising international fuel prices in favour of the consumer, the IPPR said. ‘Credit extension to individuals moved sideways as consumers began to reduce their debt levels. Consequently, the Consumption Index fell 0,4 per cent month-on-month and remains subdued. ‘The lack of consumer confidence is expected to put additional stress on consumption-led growth and is thus weighing down business sentiment, along with the expectation that the rand will remain stronger for some time to come,’ the IPPR said.Consequently they don’t expect the IJG Business Climate Index to remain at the same recent high levels.