South African business confidence stayed locked at the lowest level in two years in the second quarter as a slump in economic output raises the risk of a second recession in successive years.
A quarterly gauge measuring sentiment was unchanged at 28 for the three months through June, FirstRand Ltd’s Rand Merchant Bank unit and Stellenbosch University’s Bureau for Economic Research said in a statement last week. The reading shows that more than two thirds of respondents are dissatisfied with current conditions, and it matches the median estimate of four economists in a Bloomberg survey.
The low confidence points to another poor quarter for Africa’s most-industrialised economy after output contracted a surprising annualised 3.2% in the first three months of the year. That raises the risk of recession, following a slump in 2018, and heightens the threat of another credit-rating downgrade. “Besides stubbornly low confidence and business activity deteriorating in all five sectors, output of the large business-services sector also weakened noticeably,” RMB said.
President Cyril Ramaphosa’s rise to power boosted business confidence in early 2018 but sentiment has slumped as trading conditions remain depressed. While measures to “reverse South Africa’s decline” are encouraging, gains will only materialise in the longer term, said Ettienne le Roux, the chief economist at RMB.
Motor-trade confidence suffered the biggest decline, falling to 17 from 26 while retail and wholesale trade showed modest gains.
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