Matters ranging from changing the guard at Treasury to financial risk assessments in addition to tentative global and domestic economic developments, impacted negatively on the business climate in December 2015. Some expected, but also unpredictable decisions, contributed to uncertainty with strong responses from notable financial markets. As a result, the SACCI Business Confidence Index (BCI) slipped back further to 79.6 in December - the lowest level for the BCI in 2015. The BCI declined by 3.1 index points from 82.7 in November 2015 and by 8.7 between December 2014 and December 2015. The annual average of 86.4 for the BCI for 2015 is the lowest annual average since the average of 81.3 in 1993.

Although physical economic activities that are represented by BCI sub-indices did not materially decline between November 2015 and December 2015, the negative affect on the BCI mainly came from financial market sub-indices like share prices and the rand exchange rate. However, a slowdown in building plans passed is a matter of concern. Merchandise export volumes had a notable positive impact on the BCI.

The month-on-month (m/m) changes in the SACCI BCI sub-indices in December 2015 were discouraging as only export volumes made a positive contribution (see box on next page). Five sub-indices were negative and seven unchanged. In November, four sub-indices were positive, five unchanged and four negative.
The year-on-year (y/y) business climate indicators mainly compared negatively with December 2014. Only inflation and merchandise export volumes were in a positive y/y terrain in December 2015. While merchandise import volumes, municipal services and private sector borrowing did not change y/y. All the other sub-indices made negative y/y contributions to the BCI in December 2015.

The main year-on-year contribution to the deterioration of the SACCI BCI from December 2014 to December 2015 came from the weighted rand exchange rate followed by building activity, share prices and retail trade. Real financing costs, manufacturing output, and municipal services also contributed to the decline in business confidence but to a lesser degree.

The financial business climate remains tight with international capital flows being affected by the recent interest rate hike by the Fed in the United States. International commodity and precious metal prices remain under pressure. The domestic as well as global financial markets continue to experience hesitancy and uncertainty.

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