Business Climate Index Drops Slightly

The latest IJG Business Climate Index, which is produced by the Institute for Public Policy Research (IPPR), dropped by 0.9 index points in February 2014, following an expansion of 4.7 points in the preceding month. As such, the overall index now stands at 147.9 points. According to the Business Climate Monitor for 2014, the decline was on account of slight downward moves in the fish, meat and oil price indices, despite increases in most of the other components of the overall index.

Additionally, increasing inflation to 5.2 percent in February contributed to the overall decline in the index. Of the positive sub-components of the overall index, most notable was the vehicle sales index, which expanded by 36.1 points, following record vehicle sale levels in the month of February.

Building plans and private sector credit extension continue to increase, more or less in line with nominal growth, marginally above inflation levels in the country. Going forward, should an interest rate hiking cycle start in the country, credit extension could start to slow, as could building plans completed and vehicles sales.

The consumption and export indices also declined between January and February, with the investment index expanding by 3.5 points. A sizable increase in the leading indicator, which extended by 36 points to 224 points in February, is a very positive sign for the future.

This indicator suggests that the business climate will continue to improve over the coming months, broadly in line with the current growth outlook for the country.

All told, the IJG Business Climate Index remained flat in February, albeit at an elevated level following g growth through much of 2013.

Once again, the leading indicator has turned extremely positive, suggesting a g and improving business climate going forward.

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 : New Era