Local companies were slightly more upbeat in May than in the previous month as concerns over higher input costs linked to the Middle East conflict eased somewhat, the latest South African Chamber of Commerce and Industry (Sacci) business confidence index shows.After slumping 7.7 index points in April, the index edged up 0.5 points to 124.1 in May, driven mainly by higher new vehicle sales and merchandise export volumes, Sacci said on Thursday. On a year-on-year basis, the index is up 8.3 points. A decline in overseas tourists and higher inflation had a big negative impact on the index.“Between March and April … the decline of 7.7 index points was considerable. It, however, appears that the negative sentiment caused by the recent soaring crude oil price subsided somewhat in May,” Sacci said.(Karen Moolman) It cautioned that, despite recent positive reviews from ratings agencies Moody’s and Fitch, the domestic economy continues to be adversely affected by the consequences of the war in the Middle East, namely higher input costs driven by fuel prices.“Apart from global developments, South Africa has to deal with wavering domestic economic performance and structural economic adjustments,” Sacci added.“Activities like retail trade, manufacturing output, building plans passed, and mining output are not performing optimally due to subjective constraints. These activities play an essential role in underpinning business confidence.”A separate survey of about 700 manufacturers conducted by banking group Absa and the Bureau for Economic Research on May 14-25 shows that second-quarter business confidence edged up by one point to 31.Sentiment in the Absa manufacturing survey was supported by improved export sales volumes and selling prices in domestic and international markets, despite a marked deterioration in business conditions and rising input costs. “Given the global shifts and uncertainty related to the ongoing conflict in the Middle East and the associated impact on Brent crude oil and fuel prices, the survey outcome is a pleasant surprise,” said Sachin Chanderdhev, a sector specialist for manufacturing at Absa Business Banking.“However, the resultant increase in shipping costs, disrupted trade flow, heightened transport and logistical costs and general inflationary pressure suggest that the operating landscape for manufacturers will remain challenging.” The respondents indicated that business conditions have deteriorated, with the standout feature of the quarter being an 18-point increase in the unit cost of production. Manufacturers are rethinking their energy mix to combat the 8.76% electricity tariff increase from April.“The decision to migrate to renewable energy may be accelerated, particularly for manufacturers who rely on diesel backup generation and are facing significantly higher fuel costs,” Chanderdhev said.