News Column

Business Climate Index Declines in March

May 8, 2014



THE IJG Business Climate Index declined by 5,5 index points in March to reach 142.4 basis points. In February, the index declined by one point when compared to January.

The Institute of Public Policy Research (IPPR) said having topped out at a record high in November, the index has now been trending downward since then. The March decline was driven by a number of factors. Firstly, commodity prices for meat, fish and metals declined. The meat price decline is seen to be seasonal, and the price is expected to increase through the latter part of 2014, as supply constraints bite following the drought of 2013.

Metal prices continued to soften in March on account of weakening demand for ferrous metals from China, while uranium demand remained weak, despite the expectation of that Japan will restart its nuclear reactors in the second quarter, the IPPR said.

On top of the commodity price declines, the value of building plans completed declined almost five fold, following a bumper month in February. On the other hand, vehicle sales once again broke record levels in March, increasing to a total of 1 859 vehicles sold from the previous record of 1 728 vehicles sold in February.

The investment, export and leading indicators all declined in March, relative to February, but remain up on a quarter on quarter basis. The consumption index expanded notably, on account of a 28% increase in passenger vehicle sales, as well as strong growth in private sector credit extension.

The IPPR said the leading indicator decline was almost entirely on account of a decline in value of building plans passed which is not expected to continue in the coming months.

The factors behind the March decline in the index are largely temporary.

"However, slowing metal prices on account of weaker demand from China remain a concern. At least for now, this decline has been partially offset by a relatively weak Namibia dollar against the US dollar. Going forward, uranium prices are expected to increase, while ferrous metal prices are expected to stabilise, thus making the outlook more positive," the institute said.

The Index is based on 13 broad economic indicators that are likely to impact on the domestic business environment. All indicators have the same weight except for company registration data, which has a significantly lower weight to reduce its volatility on the overall Index.

The Investment Index is based on commercial vehicle sales, real value of building plans completed, NSX local index, company registrations, real credit extension, average prime lending rate, and the future oil price.

The Consumption Index is based on the National Consumer Price Index, the Namibia dollar/US dollar exchange rate, the OECD leading indicators, passenger vehicle sales, real credit extension, the average prime lending rate, and the oil spot price.

The Export Index is based on the Namibia dollar/Euro exchange rate, the deflated average price of beef and mutton, the deflated average price of white fish, deflated average metal prices and the OECD leading indicators.

The Leading Indicator is based on deflated average metal prices, commercial vehicle sales, real value of building plans approved, the NSX local index, defensive name registrations, the average prime lending rate, and the future oil price.

The Coincident Indicator is based on the National Consumer Price Index, the Namibia dollar/US dollar, the Namibia dollar/Euro exchange rate, the deflated average price of beef and mutton, the deflated average price of white fish, deflated average metal prices and the OECD leading indicators, passenger vehicle sales, real value of building plans completed, company registrations, real credit extension and the oil spot price.


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Source: AllAfrica


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