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The IJG Business Climate Monitor decreases

by Kelvin Chiringa

Analyst Robert McGregor has said that the IJG Business Climate Monitor decreased marginally in January 2018, falling to 49.30 points after four months of consecutive improvements.

 McGregor says, “The leading indicator, however, continues to show improvement after expanding to 45.70 points.”

He further says while both the index and leading indicator remain below the 50-point mark, the increase in the leading indicator suggests a moderation of the recessionary environment.

During the month, 13 of the 31 indicators showed improvement, while the remaining 18 showed contractions.

The overall decline in the index was driven by weaker commodity prices in Namibia dollar terms, company and CC registrations, the trade deficit, and slower credit extension to corporates.

While the appreciation in exchange rates managed to offset a stronger oil price, it resulted in weaker commodity prices across the board.

In Namibia dollar terms, copper prices fell 6%, gold and diamond prices are down 1.2% and 2.6% respectively, and uranium fell 11%.

With the uranium spot falling to US$22,25/lb, there is concern for the long-term future of the industry as the prices remain depressed.

 On the upside, inflation slowed to 3.6% in January, easing some pressure on consumers at the start of the new year.

Passenger vehicle sales have increased, both on a monthly and a 12-month rolling basis (the latter a first since mid-2015). Similarly, the value of building plans approved is up 4%y/y and an impressive 168% (or N$170m) m/m. 

The index encompasses 31 indicators, selected from available high-frequency data. These are split into five broad categories, namely: policy environment, primary sector output, secondary and tertiary output, external account, and pricing.

 Given the available high-frequency data, these categories provide the best available high-frequency insight into developments in the local economy and business cycle.

The raw data are adjusted and transformed for seasonality, inflation and exchange rate as appropriate.

In addition, the data are adjusted to factor in whether higher or lower values are desirable (for example higher government spending is positive for the business climate, while higher interest rates are negative).