The short-term movements (m/m) in the BCI sub-indices reflect that only two of the thirteen sub-indices were positive compared to May 2013, three were unchanged and eight were negative. The year-on-year (y/y) movements of sub-indices however revealed improvements in manufacturing output, new vehicle sales and construction of buildings activity. The financial environment was uncertain with three of the six financial sub-indices impacting business activity negatively on a y/y basis.
The disruption in global financial markets in June 2013, attributable to the announcement that the USA is considering tapering off its liquidity enhancement program known as Quantitative Easing (QE), adversely impacted business confidence. An improperly implemented reduction in QE would have a profound effect on financial markets and on the flow of global investment funds. Businesses in emerging markets must be prepared to accommodate a reduced liquidity environment as much of the QE liquidity found its way to emerging economies’ capital markets. SACCI is concerned that countries considered to have high balance of payment (BoP) sensitivities, such as chronic current account deficits and dependence on portfolio capital inflows from abroad, would be hardest hit by financial market turbulence.
SACCI remains concerned about the capacity of the domestic economy to contend with the prospect of higher inflation, further constraints on access to liquidity and economic stagnancy in a variety of sectors. Investor and business confidence must be restored. Sustainable economic growth remains the only platform from which a response to South Africa’s socio-economic challenges can be addressed.