Merchantec CEO Confidence Index Climbs by 7% in Q3 as CEOs Anticipate a GDP Growth Rate of 1.5%
The Merchantec CEO Confidence Index has recorded a 7% increase in CEO confidence in Q3 of 2024, rising to a score of 55.0. This improvement reflects a cautiously optimistic outlook among South African business leaders, spurred by positive developments in the formation of the business-friendly GNU, and the recent reliable electricity generation, however, CEOs realise there is still a lot of work to be done to reduce Government spending and inefficiencies, interest rates, crime and policy uncertainties.
Looking ahead, the majority of CEOs anticipate a GDP growth rate of 1.5% for 2025 which aligns to the South African Reserve Banks forecasted GDP growth rate. Despite economic, governmental, and regulatory challenges, there is an underlying hopeful sentiment for significant advancements in governance and infrastructure to support economic development.
Overall, 65% of CEOs perceive current economic conditions and industry growth expectations to be moderately to substantially better compared to 6 months ago, while 68% of CEOs also have moderately to substantially higher growth expectations for their company.
The rise in confidence among business leaders is positive, as it is likely to drive higher levels of investments in areas such as capital expenditure, personnel expansion, acquisitions and more.
Sector-Specific Insights:
Industrials increased by 7% which was primarily driven by a 25% increase in perceived economic conditions and a 10% increase in confidence relating to company growth expectations.
Financials recorded the largest increase in confidence at 23% moving to a score of 71.14 points. The increase in overall confidence was primarily driven by an increase in perceived economic conditions and industry growth prospects.
Information Technology increased by 8%. The increase in overall confidence was primarily driven by a 39% increase in perceived economic conditions and a 23% increase in planned levels of investment.
Consumer Discretionary recorded the second largest increase of 22%. The increase in overall confidence was driven by increases in contributing individual components of the index namely, 65% increase relating to improved economic conditions, increase in industry growth expectations by 39%, company growth expectations by 12% and in planned level of investment by 14%, despite confidence in the ability to secure debt or equity capital remaining flat.
Consumer Staples went up to a score of 61.67 seeing a 4% increase in overall confidence supported by stable demand for essential goods and improved supply chain efficiencies.
Health Care went up by 6% despite a 37% drop in confidence relating to industry growth expectations. The primary area of concern is due to challenges including regulatory hurdles and cost pressures.
Materials recorded the third largest increase in confidence at 21% moving to a score of 64.44 points. The increase in overall confidence was primarily driven by a 77% increase in industry growth prospects.
Real Estate saw an 18% increase which was predominantly driven by a 25% increase in confidence relating to economic conditions.
Communications Services recorded the only decrease of 4%, despite still being the most confident sector overall at 81.23 points.
