Economy and Finance Reporter

IMPROVED business sentiment in the building and new vehicle trade sectors gave a boost to overall business confidence last quarter, enhancing the outlook for economic growth this year.

The business confidence index survey conducted by Rand Merchant Bank (RMB) and the Bureau for Economic Research rebounded above the critical 50-point level to 55 last quarter, from 50 in the second quarter.

This bodes well for overall economic growth, suggesting that the slowdown in gross domestic product (GDP) growth was arrested in the middle of the year.

Respondents also expected fourth-quarter growth to be much better than the third quarter's as lower interest rates and an emerging recovery in the global economy would boost local growth prospects.

New vehicle dealer business confidence jumped sharply by 30 index points from 29 points during the second quarter. Without the large increase in new vehicle dealer confidence, the overall business confidence index would probably have remained unchanged or increased only slightly.

RMB chief economist Rudolph Gouws said the increase in vehicle dealer confidence could be attributed to the pick-up in sales in the third quarter. "Interest-rate cuts and higher confidence levels of highincome earners boosted sales of new vehicles," he said.

The survey showed that building contractor confidence increased to its highest level in 15 years.

This surge was attributed to the substantial rebound in building activity brought about by higher prices of existing houses as well as lower interest rates, which made building activity more attractive.

In three out of five sectors manufacturing, retail trade and wholesale trade business confidence declined, but remained close to or within positive territory. Business confidence was described as fairly buoyant in all sectors covered except for manufacturing.

Manufacturing production figures released by Statistics SA show manufacturing production surged 2,9% in July, the sector's biggest monthly growth in more than a year, raising hopes that the recession in the sector was near an end.

The business confidence index indicated that retailer business confidence had declined slightly to 60 from 64 in the second quarter.

Sustained growth in durable goods sales furniture, appliances, and hardware kept the overall retail trade going as the growth of semidurables clothing, footwear and textiles slackened noticeably.

Oct 01 2003 07:43:12:000AM Rochelle McCauley Business Day 1st Edition