Confidence up marginally from depressed levels: RMB/BER

By Janice Roberts

After dropping from 28 in the second quarter to a 20-year low of 21 in the third quarter, the
RMB/BER Business Confidence Index (BCI) rose to 26 in the fourth quarter – the first improvement in two years. This outcome reflects the responses of 1800 business executives surveyed during the first three weeks of November.

  • Confidence rebounded in three of the five sectors making up the BCI namely the building,
    manufacturing and retail trade. It declined in the new motor trade and remained essentially
    unchanged in the wholesale trade sector.
  • Confidence among building contractors deteriorated from 30 to 23 in the third quarter before bouncing back to a still-low 31 in the fourth quarter. Although residential activity recovered somewhat after three quarters of extreme weakness, non-residential building activity remained ever so subdued.
  • After slipping from 22 in the second quarter to 16 in the third, manufacturing confidence improved to 24. Despite this rebound, confidence remained extremely low, weighed down by, among other factors, continued poor production output (spread out across a variety of sub-industries), and disappointingly weak export sales.
  • Although retail confidence jumped from 17 to 30 in the fourth quarter, it merely countered the 11-index point drop of the quarter before. Except for durable consumer goods, retail sales generally remained quite weak. However the imminent Black Friday and Christmas sales could change the fourth quarter outcome.
  • As for the two sectors that showed deteriorating sentiment, wholesale confidence dropped from 42 to an unusually low 29 in the third quarter, easing even further to 28. While sales volumes of consumer goods improved a little, those of nonconsumer goods remained heavily depressed.
  • New motor trade confidence also fell; its BCI dropped back to 17, in so doing fully reversing the five-index point improvement to 22 in the third quarter. There are few, if any, signs that the sales of new passenger vehicles have turned the corner.

Bottom line

Though the fourth quarter rebound in the RMB/BER BCI is encouraging, some realism is
necessary: the improvement was a mere five index points and was not broadly-based
across sectors. Moreover, at 26, the BCI remained deep in net negative terrain, with a
strong majority of respondents still expressing a sense of pessimism. Indeed, at current
levels, business confidence remains consistent with an economy bumbling along in near
recession-like conditions.

“For us to convincingly conclude that the long and persistent downturn in the RMB/BER
BCI has bottomed out will take, not one, but several quarters of improvement in sentiment
driven by a consistent recovery in underlying activity. Further signs that the worst point of
the slowdown in global trade is behind us, coupled with a confidence-inspiring National
Budget and the successful implementation of the government’s new Economic
Transformation, Inclusive Growth and Competitiveness Strategy will certainly go a long
way to help make this happen”, said Ettienne Le Roux, chief economist at RMB.

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