Business Climate Drops to 153,8 Points in April

THE IJG Business Climate Index dropped by 15,5 points to reach 153,8 points in April.

The index is prepared by stockbrokers, IJG Securities and economic think tank, Institute of Public Policy Research (IPPR).

The report said the index turned sharply downward in April, reversing gains for the year as the oil price bounced back.

“While the decline in the index was aggressive, it was caused by a number of indicators moving away from long-term levels and trends, and as such is expected to be short-lived. All of the broad indices and indicators monitored contracted during the month with the exception of the export index, which improved marginally” the report said.

IJG and IPPR said the drop was due to a jump in oil prices and a decline in company registration.

The report said a drop in construction activities and new car sales contributed to the decline in the index.

“As well as the jump in the oil price in April, from U$57barrel to U$67barrel, notable declines were seen across various indicators. Company registrations declined to 1 895 from 2 167 a month earlier,” the report said.

The value of building plans completed halved, from N$40 million in March to N$20 million in April, while building plans approved fell from N$195 million in value to N$110 million, the report said.

Vehicle sales also saw a notable decline, falling from 2 150 in March to 1 742 in April.

The oil price recovered after its 50% fall between June 2014 and January 2015.

“However, it remains heavily depressed when compared to a year ago. Year-on-year, the price at the end of April was down 37%,” the report said.

The report said with Namibia being a net importer of oil, this general downward trend is a positive for the index in the long term, but the recent rebound in price is a short-term negative.

Through May and into June, the price fell once again, returning to levels below U$60barrel.

The report said the decline in building plans approved and completed as well as vehicle sales appears to be a once-off development.

“The magnitude of the index reaction to these declines speaks to the g base that has been created for these categories over recent months. In addition, building plans as well as businesses registered tend to be highly cyclical and volatile,” the report said.

On the positive side, metals prices moved in favour of producers, with both copper and zinc recovering in comparison to the preceding month. The copper price increased from U$6 065 per tonne to U$6 365 per tonne while the zinc price increased from U$2 072 per tonne to U$2 367 per tonne.

The uranium price contracted slightly from U$39,5 per pound to U$37 per pound.

The Business Climate 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. Data is collected on each indicator on a monthly basis.

Source : The Namibian