The country’s main measure of business confidence, the Business Confidence Index (BCI), plummeted for a second consecutive month in January eclipsing the wishes of some economists who were hoping that the positive sentiment in car sales indicated that consumer demand may be recovering.

The BCI, South Afriaca’s main measure of business confidence, is compiled in 13 economic indicators such as retail sales and inflation, including the stock index and the currency.

Although the BCI had lost positive momentum over the festive period, SACCI said it was hopeful that the business confidence outlook will change amid the positive sentiment of recovery in the local economy.

The chamber said from December 2009 to January 2010, nine BCI sub-indices had a positive effect on the BCI. However, it was concerned about the negative impact of the decline in sub-indices of import and export merchandise volumes in the overall BCI outlook.

"This demonstrates the impact of international trade on the local business environment. The low import volumes are also reflective of weak domestic demand conditions and a languid domestic economy," SACCI said.

The local economy has been lagging behind in recovery stakes compared with other developing countries despite the aggressive interest rate cut by the Reserve Bank since December 2008.

SACCI noted that although the anticipated recovery will be protracted in advanced economies, activity in emerging and developing economies is expected to be generally robust.

"SACCI is concerned that the South African economy is yet to share in the vigorous economic recovery anticipated for key emerging market economies. The consequences of the recession may still pervade the domestic economy and contribute to the tentativeness in the business environment as well as in business confidence.

"Economies globally are experiencing differing levels of confidence although they are broadly trending in a positive direction. It appears that the restoration of confidence is a key ingredient of the economic recovery. Opaque and incoherent policy signals would undermine local business confidence, investor confidence and the pace of economic recovery," SACCI said.

Meanwhile, economists expect the number of people who lost their jobs last year to pass the 1 million mark when Statistics SA releases its labour force survey today.