The slight monthly pick-up for economic transactions in October provides a glimmer of hope for the South African economy, with this improvement potentially continuing into Black Friday on 29 November.
The BankservAfrica Economic Transaction Index (BETI) for October was 127,4, representing a 0,2% monthly growth. The moving quarterly change remained in negative territory after experiencing a 2,2% decline, according to Shergeran Naidoo, head of Stakeholder Engagements: BankservAfrica. “However, the year-on-year BETI experienced the deepest decline since March 2019 even without the recovery and given that there has been positive year-on-year growth from April to September.”
“October’s monthly increase provides a glimmer of hope, but the overall data should not be disregarded,” says Mike Schüssler, chief economist at economists.co.za.
According to Naidoo, the nominal standardised value of transactions was R895,4-billion, a slight reprieve from the R876,1-billion in September. “As the standardised nominal value takes the number of weekdays and weekends, along with holidays into account, this increase is significant after three months of declines in nominal terms,” says Naidoo.
He adds that the number of transactions increased to above 101,5-million again, which is more positive than the 99-million in the previous month. “With next month’s data containing Black Friday spend, it could potentially lead to two successive months of volume growth,” says Naidoo.
The Minister of Finance Tito Mboweni presented his Medium-Term Budget Policy Statement (MTBPS) in October, which laid out a very depressed outlook for the South African economy. The National Treasury’s growth forecast for 2019 is 0,5%, and 1,5% next year. The South African Reserve Bank, International Monetary Fund and The World Bank have made similar predictions.
“The MTBPS was far more realistic and closer to actual real economic indicators like the BETI, Purchasing Managers’ Index, vehicle sales and other now cast indicators,” says Schüssler. “These early release indicators showed a slight uptick in October but also revealed that the general trend is still one of a declining economy.”
The value of economic transactions in the BETI data lies in the fact that it is the broadest actual indication of the “real world economy”. At present, late release indicators, such as manufacturing production and retail sales, are following the same trend, proving the value of early release economic indicators.
The BETI data reveals that the South African economy is now in the 71st month of the downward phase of the business cycle – the longest phase of decline since 1945. “While the long-term trend is lower, the economy is still growing – but at a pace that is lower than the population growth rate,” says Schüssler.