The top business executives of South Africa are less confident about prospects, amid concerns over market conditions and a general lack of confidence in the heath of the global economy, the Merchantec CEO Confidence Index showed on Tuesday.
The survey, which collates views from CEOs of top South African companies, recorded its biggest drop, to date, falling 10.07 points to 55.5 in the second quarter of 2012.
The dampening of growth and demand from the crisis-ridden eurozone has considerably dented confidence on the whole, with 70% of South African CEOs confirmed that their business was more affected by economic conditions in Europe than those in China.
CEOs’ confidence in economic conditions fell 23% in the second quarter to 47.3. Factors contributing to the decline this were uncertainty over the ongoing European debt crisis and the potential contagion from Greece to other highly indebted eurozone countries.
Further, recent data which reflected a quicker-than-expected cooling of the Chinese economy and higher unemployment levels on the local front were also plaguing confidence in the economic conditions component of the index.
“It appears that the higher levels of confidence in the first quarter were as a result of expectations for improved conditions in the future and not necessarily as a result of improving business activity,” Merchantec stated.
The consumer goods sector recorded the largest decline in confidence, showing a 27% decrease to a score of 47.5 – the lowest across any sector.
Merchantec stated that the drop in confidence was not unexpected, given the steep price increases in petrol, electricity and taxes during April 2012, which have resulted in an adverse effect on inflation prospects and consumer spending.
The financial sector recorded the only rise in confidence in the second quarter with a 1.5% increase in sentiment to a score of 67.3. The improvement in sentiment came as a result of CEOs’ increased confidence in their company growth prospects, their ability to raise debt or equity capital and their planned level of investment in their company’s business activities.
The Merchantec CEO Confidence Index collates responses from over 100 CEOs, mainly from the listed environment.