Business Confidence and the Business Cycle in South Africa

Abstract

Business confidence indicators are widely used leading indicators of economic activity. A large international literature has also investigated the potential role of low confidence in shaping economic outcomes. It is therefore important to measure business confidence as accurately as possible. The authors use the microdata from the BER’s business tendency surveys to create new composite indicators of business confidence for South Africa. The indicators are refined by incorporating more survey information and applying a consistent weighting procedure. The authors demonstrate a significant positive relationship between confidence and real economic activity, the consistent timing of this relationship, and that it remains significant after taking other variables into account. The confidence indicators therefore contain useful information about current and future economic developments.