Despite business confidence within the other services sector remaining depressed, hotels and restaurants have seen a massive boost.

This is according to the Bureau for Economic Research’s (BER’s) latest Other Services Survey results, which grew from 43 points in Q2 to 48 points in Q3.

Confidence levels remain below the long-term average of 52 points, however.

“Although this is a positive development, the sector has yet to regain the 25 points it lost in the first half of this year. At the current level, just under half of the surveyed business executives in this sector express satisfaction with the prevailing business conditions,” the BER said

The improvement in confidence comes amid an improvement in business conditions about the long-term average.

That said, a net majority said they saw a decline in business volumes (down from 6% in Q1).

Despite this decline, the BER said that the current activity level is usually linked to a slightly higher level of confidence. It said that several factors were weighing on business confidence.

“The challenging business environment, marked by frequent (although less intense) load shedding episodes during the survey period, coupled with elevated borrowing costs, continue to shape the landscape of the other services sector, though these constraints vary across different subsectors,” it said.

Looking specifically, the hospitality subsector regained some confidence, climbing from 52 points in Q2 to 67 points in Q3, following a 23-point drop in Q2. The hospitality subsector had the highest confidence out of any surveyed subsector.

Profitability improved during Q3 due to a strong performance in business volumes, even if there was a slowdown in selling prices.

Business confidence in the transport, storage and communication subsector also grew by 35 points to 46 in Q3 – one point above its long-term average. The BER said that this corresponds with an improvement in business conditions and business volumes.

However, confidence amongst realtors continued its fifth consecutive quarterly decline, dropping to 24 in the quarter.

“Despite improving business conditions, four out of every ten surveyed business executives are experiencing worse business conditions than a year ago. A significant drop in business volumes and a slowdown in selling prices will likely continue weighing on sentiment in the real estate subsector,” the BER said.

Confidence in the business services sector stayed the same at 59, with the higher selling prices boasting profitability and conditions in the sector, despite a decline in business volumes.

Commentary

“The surge in confidence in the hospitality subsector and the partial recovery in the transport, storage and communication subsector were supportive of overall sentiment in other services with confidence edging closer to its long-term average,” the BER said.

Load shedding also boosted restaurant activity, which boosted the confidence amongst hotels and restaurants, with over a third of respondents satisfied with the business conditions.

Warehousing activity was also boosted by consistent challenges in the rail, road, and freight sectors.