Business climate index takes another plunge

The local business climate index market took another fall with the export index dropping by 2.7 basis points to 121.5 as of 31st December 2012.
Metals, on the other hand, had a good month, with copper and zinc prices remarkably rising to nine and 14%, respectively, while uranium prices fell one percent.
These figures were released by the Institute for Public Policy Research (IPPR). They are based on factors like deflated metal prices, commercial vehicle sales, the local index of the Namibian Stock Exchange, defensive name registrations, the average prime lending rate and the future oil prices.
 “The IJG Business Climate Index fell for the second consecutive month, this time by a margin of 9.2 basis points during December. This brings the cumulative decline to 16.7 basis points over the past two months. Businesses invested less during December largely due to fewer building plans being completed because of the construction holiday that begins on the December 10th. Commercial vehicle sales also contributed, as 19% fewer commercial vehicles were sold,” reads the release.
The drop in commercial vehicle sales and the fewer building plans was imperatively far less than that of November, saw consumers going on a spending spree by buying cars, borrowing money and extending their homes.
Though the lack of effect these two developments had on credit extension numbers, the research organisation suggests, both were financed from owner’s equity at the businesses responsible.
“Although credit to business rose 30% year on year, it was mostly unsecured lending in the mining, energy and retail industries to finance day-to-day operations and not investment in machinery and equipment. Consequently, the investment index fell by 17 basis points,” states IPPR.
Namibia’s export-led economy continues to reel from falling metal prices and weakening outside demands, though a surge in construction activity and steady improvement in the Namibian Stock Exchange’s (NSX) local index shows, investor confidence was up in December.
“The future does not look too bright either, as the leading indicator took yet another knock, shedding almost 10 basis points on the back of lower investments. The consumption index, an indicator of consumer confidence, shed 3.7 basis points due to decreased passenger vehicle sales, which dropped 14% month-on-month (December is usually a bad month for passenger vehicle sales). The export sector bucked the negative trend during December, with the export index rising 2.4 basis points. Metal prices fell 0.4%,” the think-tank discloses.
Fish prices remained unchanged. But favourable exchange rates translated into higher prices for both metal and fish exporters. Beef prices rose by 6% due to strong weaner calf prices while mutton prices were down due to softer demand.
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 significantly lower weight to reduce its volatility on the overall index.
Consumers were “surprisingly” confident through January, the IPPR said, resulting in the consumption index rising 2.6 basis points to 101.4.
Consumer credit was up two percent month-on-month, as consumers’ appetite for overdrafts, credit cards and vehicle and asset finances increased. Passenger vehicle sales increased by 14%, “possibly because tax savvy consumers rushed their purchase decisions before the anticipated introduction of an emissions tax.”
The business climate index is based on all indicators that are mainly the investment index, the consumption index, the export index, the leading indicator and the coincident indicator.