The sector grew less than expected at the start of the third quarter with marginal growth of 1.8% year on year in July 2017 compared to 2.9% in June.

The Rand Merchant Bank Bureau for Economic Research (RMB/BER) business confidence index (BCI) for the third quarter showed an economy still struggling to maintain meaningful growth, although it rebounded slightly from the dismal second-quarter drop.

The index was up by six points to 35 in the third quarter from 29 in the previous one. Crucially, the index and sub-indices remained below the neutral 50 level, which divides expansion from contraction.

Consistent with mediocre growth in trade volumes, retail confidence remained virtually unchanged, picking up just three points to 38.

In a statement on Wednesday, RMB/BER said: “This is not the environment in which the economy is about to experience a resurgence. In fact, the more likely scenario is one where GDP growth remains stuck at about 1% over the short to medium term, hamstrung by lacklustre private-sector fixed investment and jobs growth.”

BNP Paribas economist Jeff Schultz said: “This is indicative of increasingly weak domestic growth potential and, more recently, a highly fluid and uncertain political outlook.”

FNB senior economic analyst Jason Muscat said the recent interest-rate cut and persistently low inflation indicates that some consumer relief may be on the horizon. “We maintain, however, that this relief will likely be short-lived as tax revenue shortfalls will have to be bolstered by further tax hikes in the new year.”

Business Unity SA said: “Business confidence is a reflection of the economic environment and translates directly into GDP, employment and the lives of many South Africans, particularly the poorest in society who depend on social grant funding and transfers.”

Source: Fastmoving