South African business confidence unexpectedly recovered in the third quarter to levels last seen before the coronavirus and restrictions to curb its spread, indicating the economy may have passed the low point in its cycle.
A quarterly gauge measuring sentiment rose to 24 from a record low of 5 in the previous three months, FirstRand’s Rand Merchant Bank unit said Wednesday in a statement. That’s the highest level since the last quarter of 2019, when the index measured 26. The median estimate of three economists in a Bloomberg survey was for the indicator, which is compiled by Stellenbosch University’s Bureau for Economic Research, to rise to 8.
The improvement in business sentiment could mean that the 51% annualised contraction in gross domestic product in the three months through June was the worst point in this cycle, said Ettienne le Roux, RMB’s chief economist. GDP could rebound and grow by an annualised 20% to 25% in the current three-month period, according to RMB.
The sub-index measuring wholesale confidence gained the most, rising to 33 from 4 in the second quarter. That was driven by a “vibrant agricultural sector that boosted certain consumer goods sales” and a continued recovery in international trade. Agriculture was the only sector that expanded amid virus restrictions in the second quarter, Statistics South Africa data showed Tuesday.
However, pain for businesses in an economy that entered its longest recession in almost three decades, according to Tuesday’s data, is not over. Almost eight out of every 10 executives surveyed found the prevailing business conditions unsatisfactory, RMB said.
While a gradual re-opening of the economy started on May 1, some companies closed down permanently or fired workers during the shutdown. The fieldwork for the survey covered the period immediately following the announcement by President Cyril Ramaphosa that the country will move to the less restrictive level 2 of the lockdown. It was also completed before the renewed onset of widespread power cuts, RMB said.